Tracker Mortgages are not the only type of variable rate mortgage available on today’s market, discount mortgages work in a similar way as tracker mortgages however the interest rate is not linked to the Bank of England’s base rate instead it is linked the lenders Standard Variable Rate. It’s worth keeping in mind your lender can raise their Standard Variable Rate even though the base rate has not changed. Discount mortgages are available over a variety of different terms typically between 2 and 5 years, always remember if you decide to leave your mortgage deal before the introductory term is over you will most likely be charged an exit fee which could be thousands of pounds.
Advantages of Discount Mortgages
Much like tracker mortgages the rates tend to be lower than they would on a fixed rate deal (although this can change with market conditions) and because the interest rate is variable if your lender’s current Standard Variable Rate was to fall your monthly payments would reduce as well.
Disadvantages of Discount Mortgages
Discount mortgage rates are linked to a Standard Variable Rate and not to the Bank of England base rate. This means that any changes made to your interest rate will reflect changes made to the lender’s standard variable rate & not necessarily any changes made to e.g. Bank Of England Base Rate.
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