What is the difference between a discount tracker and a variable rate tracker?

Posted on 29 April 2008

Hi Katie,

Could you explain the difference between a discount tracker and a variable rate tracker?

Thank you for your time

Certainly;  a discount tracker is a discount from the lender's Standard Variable Rate. Every lender has one, and they are normally a few percent above Bank Rate (the Bank of England rate).  Halifax, for example, has an SVR of 7% currently.  (April 08)   A discount tracker tracks below this, so you might get a deal that says "1.5% discount for two years" which means the rate will always be 1.5% lower than heir SVR.   They can move their SVR independently whenver they please, although most of the time, they put it up and down with Bank of England rate changes, which is what it means when you hear Alastair Darling on the news pleading with lenders to "Pass on the rate cut in their mortgage rates".

A tracker/ variable rate tracker/ Bank rate tracker/ Base rate tracker mortgage simply tracks the Bank (of England) rate, so it might be listed as "1% over Bank Rate".  This obviously moves up and down too, but is not quite as open to the slight risk of the lender changing their SVR.

 

 

Category: Fixed or Variable?

 

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