If you have done your research prior to getting in touch with an open and honest mortgage broker in Doncaster, you may have come to realise there are a lot of different mortgage types available to first-time buyers, all varying on the circumstances they are appropriate for and who is eligible.
Throughout this article, we are going to take a more in-depth look at the tracker mortgage, how it could benefit you and your mortgage situation, as well as why it is a popular choice amongst homebuyers.
First of all, please remember that a mortgage deal is only as good as the circumstances it matches up with, so though it may seem good on the surface, it may be the wrong path to take entirely.
To give out an example of what we mean here; Initially you could take out a tracker mortgage, only for you to later decide that fixed payments would’ve been your preferred option (via a fixed-rate mortgage). Once you’re at this point, you have already locked yourself into a contracted agreement and making changes wouldn’t be an option.
As a reputable, experienced and hardworking mortgage broker in Doncaster, we will always recommend that you get yourself prepared and making sure you are well researched prior to your mortgage journey getting underway.
We feel like home buyers would truly benefit greatly from taking up expert first time buyer mortgage advice in Doncaster.
As an alternative to our article, we also have a YouTube video on the same topic readily available for people to watch. Feel free to head on over to our moneymanTV channel to view more helpful video guides, presented for free by the ‘Moneyman’ himself, Malcolm Davidson.
Well, now let’s get down to business. I’m sure the first thing you want to know is; What is a tracker mortgage?
So if you were to find yourself on a tracker mortgage, your interest rate would move along with the Bank of England’s base rate and typically with an additional percentage added on top by your mortgage lender.
Your lender cannot choose the rate, as this is usually an externally set rate and will have to be followed strictly.
An example of this would be if the Bank of England’s base rate was running at 1%, your lender would have to add on another set amount, let’s say 1%.
This means that regardless of what the Bank of England’s rate percentage is, your interest rate will always remain just above that figure.
A tracker mortgage can be incredibly useful if the Bank of England’s rate is running at a slightly lower rate. It will generally sit around 0-1%, though as the year goes on it will naturally go up a little bit.
Previously, during the credit crunch in 2007-2008, the market plummeted and interest rates went sky high. At it’s highest, it was sitting around 5%.
Of course when adding on the percentage that your lender would add on top of this figure, you could’ve ended up with a rather sizable 6% interest on your monthly mortgage repayments.
On the other side of the coin, looking back to March 2020 (around the start of the coronavirus), the mortgage market had a similar scare when the Bank of England’s rate dropped significantly, dropping a down to an incredibly low 0.1%.
If you were on a tracker mortgage during this period of history, the chances are that you would’ve also dropped down to an interest rate of somewhere around 1.1%.
Naturally because of this, a lot of lenders simply stopped offering this mortgage type to their customers, as really it would’ve been too good to be true. A mortgage lender is still a business at the end of the day and need to turn a profit.
Nowadays the market seems to be almost back in full swing and customers do have better chances now of obtaining a tracker mortgage than they would’ve before, especially one that will be well suited to your financial circumstances.
A tracker mortgage does have both it’s ups and downs, as it will rely pretty massively on the economy. If anything happens to the market and the Bank of England’s rate goes high once again, a tracker mortgage is definitely not the sort of mortgage to go for.
On the flip side of that argument, if the situation is that the economy is doing extraordinarily well with a low Bank of England base rate, a tracker mortgage is one we could definitely look at for you, as you may benefit well from it. Again though, this also depends on what you’re looking to do.
There are a wide variety of mortgages types available out there for prospective first time buyers in Doncaster and existing homeowners alike, it’s just finding the one that is right for your personal and financial needs.
Before taking the big leap into any mortgage deals, we would definitely suggest that you speak to a trusted mortgage advisor in Doncaster about what paths are open for you to walk. They will try and find you the best deal they can.
If you are a first time buyer in Doncaster, we believe you’ll benefit immensely from our dedicated mortgage advice service. We have over two decades of experience in the mortgage world and have expert knowledge on various mortgage lender criteria.
We are also available to speak with and provide assistance to any customers looking to remortgage or move home in Doncaster. We hope you will find our mortgage advice service invaluable.
As your hardworking and responsive mortgage advisors in Doncaster, we will work alongside you from beginning until end, offering you mortgage guidance and support all throughout your journey.