Fix and Track
What is a Fix and Track Mortgage?
A fix and track comes in two parts, firstly there is a fixed interest rate for a specified amount of time, usually a year. After this year the mortgage evolves in to its secondary phase and becomes a tracker mortgage that then tracks the base rate of the bank of England and charges a set amount of percentage above this base lending rate.
This mortgage deal is designed for borrowers who want the security of an interest rate that is fixed to start with but if rates begin to fall you don’t want to get stuck paying over the odds, so most of these deals start off with a fixed rate for about a year or 2 then turn into a tracker with interest charged at a set percentage above the Bank of England’s base lending rate for the rest of the term of the mortgage.
This is a fairly new kind of mortgage deal which is designed for borrowers who want the security of an interest rate that is fixed to start with but if rates begin to fall you dont want to get stuck paying over the odds. Most of these deals start off with a fixed rate for about a year then turn into a tracker with interest charged at a set percentage above the Bank of England's base lending rate for the rest of the term of the mortgage.
When would be a good time to get one?
The positive side of this deal is good when interest rates are rising and could stabilise or fall in the near future. On the other hand the interest rate for the fixed period and the percentage it then tracks above base rate may both be higher than for market leading traditional fixed or tracker deals.
The advantage of a tracker mortgage is you are not reliant on the standard variable rate of the lender and if you choose a discounted rate you may find that for the first 12 months to 24 months you may be paying less than the base rate.
Any disadvantages?
The main disadvantage is that interest rates can go up and the percentage it then tracks will be higher than the traditional fixed or tracker deals.
When would this be offered to me?
To be accepted for this type of mortgage deal you may need quite a large deposit so this would propably be a more suitable deal for remortgage customers than for first time buyers. There is also likely to be an early repayment charge which could well stretch beyond the initial fix rate so to ensure you don't take advantage of this then your best move is to deal with another lender.