Do tracker mortgages really work?
While the idea of mortgage tracker funds is to basically track the level of interest rates in the UK, do they always deliver what they promise and are they as readily available now as they were before?
Tracker mortgages have become very hot news across the UK as interest rates continue to come under pressure after the last 0.5 percent cut to 4.5 percent. There is even talk that rates may fall to as low as 2% next year in a last ditch attempt to refloat the economy. But is the home owner getting the full benefit?
It was highly noticeable after the last interest rate reduction that the number of mortgage tracker offers fell substantially overnight. The banks could see rates falling below what they are currently paying for finance which made them uncommercial. While internal money market rates should reduce in due course and allow banks to start and offer more tracker mortgages, what will happen if rates fall to 2.5% of even lower?
It has just been revealed that a number of mortgage lenders have tracker mortgages which cannot, due to their small print, fall below a certain level even if base rates fall. The minimum rate for the Lloyds tracker is said to be 3 percent while Nationwide's product can move as low as 2.75 percent. The motto of the story is, always read the small print!
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