Fix and Track Mortgages

Fix and track mortgages are a new type of mortgage arrangement that combines the predictability of a fixed rate mortgage with the benefits of a variable rate mortgage when rates fall. This type of mortgage will begin with a fixed rate. The fixed rate lasts for a short term, such as a year, and then changes to a tracker mortgage. This means the interest rate will be a set percent above the Bank of England’s rate. The tracker mortgage lasts the life of the mortgage.

Benefits of Fix and Track Mortgages

When interest rates are on the rise, many borrowers turn to fixed rate mortgages. Then, when interest rates drop, they are stuck in high interest mortgages. When rates are on the rise but appear to be stabilising or possibly falling in the near future, fix and track mortgage provide the best of both worlds. The fixed rate at the beginning protects the borrower from rising interest rates. The later change to a tracker mortgage allows the borrower to benefit from any potential drops in interest without the expenses and hassle of remortgaging.

The Cons of Fix and Track Mortgages

Fix and track mortgages are not perfect, however, and like any other type of mortgage there is a downside to this mortgage product. The biggest downside to fix and track mortgages is the fact that the fixed rate and the tracking rate are often higher than traditional tracker or fixed rate deals. The reason for this is the fact that you are paying for the convenience of having the “best of both worlds.”

As this is a relatively new mortgage structure, some lenders are not necessarily ready to give them out to risky borrowers. You will need a good credit score to apply for this type of mortgage. You will also need to have a decent amount to put as a deposit on your home if you are looking into fixed and track mortgages. For this reason, this mortgage product may work better for those who are remortgaging rather than first time homebuyers.

Finally, the early repayment charge on a fix and track mortgage almost always extends far past the fixed rate period. This means that you cannot use the fixed rate mortgage and then move to a new mortgage if rates are not dropping. The lender wants to ensure that you are going to stay with the mortgage for an extended period of time. However, if you feel that the benefits outweigh the risks, then consider talking to your mortgage broker about fix and track mortgages.