Could Life Time Tracker Mortgages be the Answer?

by Mark Johnston

Well over 100,000 home owners will see their mortgage end from now until Christmas and will be looking for a deal. When their mortgage expires they will be moved onto less attractive standard variable rates (SVR). Many borrowers are already looking for a good deal ahead of their mortgage term coming to an end.

With growing talk of Bank of England base rates going up early next year, many are choosing fixed rate mortgages to provide a degree of security so they are shielded from future interest rate changes. But with the base rate at an historic low of 0.5% is this the cheapest option? Tracker mortgages are still very low and even with an interest rate increase, they would still be the best value for money.

Borrowers coming to the end of their mortgage deal can now opt for a life of loan tracker instead of a traditional two, three or five year product. A tracker mortgage follows the Bank of England base rate (currently 0.5%) and provides a rate a certain number of percentage points above interest rates.

The banking giant HSBC is currently the biggest provider offering these types of loans along with its sister company First Direct but others such as Barclays Woolwich brand, the post office and ING direct have all launched their own versions.

As with most mortgage products these days, the best rates can only be accessed by people with either very large deposits or a lot of equity in their property. Life of loan trackers mortgages are probably more suited to those who are a few years into their mortgage and  have started to pay a good portion on their loan off.

HSBC’s best tracker is 1.69% over the base rate so with current interest rates at 0.5% the rate is currently 2.19% and only has an application fee of £99. That said the loan to value is 40% so its not available to everyone.

First Direct, HSBC’s sister company has launched its own version of the lifetime tracker which is less than two percent above base. Not quite as good an offer but still very competitive is Barclays 2.58% mortgage which tracks at 2.08% above base rate for the life of the loan, their fee is pretty steep in comparison with their rival HSBC at £1,495.

The problem with opting for a life time tracker is that borrowers are open to fluctuations in the bank of England base rate. At the moment its very low but it will rise, the question is, when will it rise and to how much. Regular readers of will know what this is a question that everyone is trying to answer but the honest truth is no one knows.

Any increase in interest rates would mean an increase on borrowers monthly payments and these could soon get unmanageable. That said, the base rate would need to increase to around four or five percent before these deals were more expensive than the average fixed rate and the good thing is that life time tracker mortgages don’t tend to include an exist or early redemption fee so borrowers could still fix their mortgage at a later date.

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