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Step 5
Consider the tracker alternative. The new variation on the discount theme is the tracker mortgage. With a tracker the rate you pay is tied to the Bank of England’s base rate, not your lender’s standard variable interest rate. Some best-buy trackers are set slightly below base rate, though most tend to be set just above it. At first glance this may not look very attractive. But again it is the price you pay that you should focus on, not the size of the discount or tracker percentage. A tracker deal set just above base rate may still produce a lower interest rate than a decent-looking discount from a high variable rate. Fans of trackers say they bring another benefit. If a bank or building society wants to boost its profits for a while it may keep its standard rate artificially high – or even increase it over and above any base rate rises. Discount mortgage customers can therefore see their payments work out far higher than they should be. With trackers the link to the official base rate cannot be manipulated. Once more you need to look at the rate you will pay on both types of deal, and how this may change in the future, when you work out which deal will be best for you.
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