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Tracker mortgages

Journalist: Melissa Lawford, The Telegraph

ended 19. June 2023

What is happening to the homebuyers who purchased using tracker mortgages at the start of this year? Did they manage to fix rates in time before the recent jumps or are they now getting hit by much higher costs? Are they at risk of even larger jumps in rates, or is there now a race to fix in?

5 responses from the Newspage community

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Michelle Lawson
Director at Lawson Financial
Sadly anyone on a tracker rate will be, and will have been affected by, Bank of England rate rises. Some lenders do have the option where you can 'switch and fix' from a tracker rate onto a fixed rate without paying penalties to do so. You should read your mortgage offer carefully or get advice from a broker to see whether you are able to do this and if it is right for you. Tracker and variable mortgages will always reflect market conditions and do come with a level of uncertainty in an unstable market however, similarly, when things do settle and at a point in the future if the Bank of England reduces rates, these mortgage holders would also benefit from the rate reductions.
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Craig Fish
Director at Lodestone Mortgages
Of our clients that took tracker mortgages earlier in the year, only one has jumped ship and fixed. Those that took these penalty-free trackers did so for a variety of reasons, primarily the full flexibility as there were intentions to make overpayments over the standard 10%. Others had the intention of potentially moving home due to changing circumstances. All of them chose this type of mortgage in the full knowledge that rates could rise as well as fall, and their choice was based on a longer-term view that rates may well drop eventually.
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Bob Singh
Founder at Chess Mortgages
Only the brave would have recommended tracker products five months ago. Many did take penalty-free trackers, or parachute mortgages, that they could exit or switch to a fixed rate in-house but others will have a penalty leaving some advisers open to criticism. Trackers rates have moved in line with Base Rate increases and pay rates have practically doubled. This will put a great squeeze on many thousands of borrowers with no end in sight for a reprieve from the Bank of England who are again expected to hike rates by as much as 0.5% this week depending on the inflation rate and other data. Cap n' Collar products may have been a better option in hindsight for some. The mortgage market is facing a stark slowdown in the coming months as the effects of rising rates feed into the economy.
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Jonathan Burridge
Founding Adviser at We Are Money
We explained to our clients that a tracker option would be a long-term, higher-risk strategy and we warned that rates would rise further. It is a case of holding their nerve and taking a longer view that rates will fall and that, on average, it will work to their advantage — but equally, of course, that it may not. Now is not the time to be jumping into a fixed rate having opted to ride the market.
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Anil Mistry
Director and Mortgage Broker at RNR Mortgage Solutions
Since the beginning of the year, I have completed only two tracker rates, both of which involved ERC-free trackers. The reason for choosing these trackers was the necessity for unrestricted overpayment options. During a recent conversation with one of the borrowers involved, it became evident that they continue to favour the tracker option rather than being constrained by the typical 10% or 20% overpayment limit of a fixed rate. Furthermore, they were happy to adapt to rate fluctuations in order to retain this valuable flexibility.