Variable vs. Tracker

Posted on 4 November 2011 by Maulik

Currenty I am coming out from fixed mortgage and now SVR applies to my mortgage which is 3.50% and I am getting an offer from other bank for a lifetime tracker 2.79% above base rate, 3.29% at the current stage, is it worth going with them ?

Also, what will happen, if the base rate goes to 1% from current 0.5% rate, what rate would be for my current lender?  I know for new lender it will be 3.79%.

Please advise me and thanks in advance.


You have made a choice to move from a variable rate mortgage that is not connected to the Bank of England base rate to a base rate tracker.  The fundamental difference between the two is that a mortgage linked to a standard variable rate can go up and down whenever the lender decides, whereas a tracker mortgage can only change when the underlying rate it is linked to changes.

In practice what this usually means is when the Bank of England base rate goes up Lenders usually pass on the whole increase in their variable rates and when the rate comes down they are not quite so generous.  You also tend to find that when rates come down there is a delay in changing, which doesn't occur when rates go up.  That said, there are a few Banks whose standard variable rate is linked to their own base rate and as their base rate tend to follow the Bank of England's these are effectively Bank of England base rate trackers.

Whether it is worth moving your mortgage will depend on you personal circumstances and attitude towards risk.  It might be better to take a longer term fixed rate for instance, but without conducting a full factfind we cannot offer any advice.

I recommend that you speak to an independent mortgage broker before making a decision because any Bank or Building Society adviser only has to advise you about the products they have available and these may not be the best in the market or the right type.


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