Tracker vs SVB

ihmoody

Which one is the best and why?

Joe_Bloggs

@ ihmoody I've never heard of SVB perhaps you can elaborate. Standard Variable Rate is a more common acronym but it may not be your SVB. SVR is often the rate that a mortgage switches to when the attractive features of a mortgage package expire. A tracker follows the Bank of England Base Rate. A good rate would always be equal or slightly higher than it by a very small percentage eg. base rate + 0.5%. Often SVR tracks the base rate at an uncompetative rate eg. base rate + 1.5% or more. There are often time limits to trackers before they become SVR. In some circumstances you are tied in to an SVR for a period of years after receiving the benefit of a tracker or fixed rate. You can often buy your way out .Feel free to consult http://www.fsa.gov.uk/tables/ as our taxes pay for this information.
J_B (Financial Services Consumer and Not an advisor).

nh

The main benefits of a tracker are that it follows the bank of england base rate, so the mortgage company can't just put it up and down whenever they feel like it.

Often, when interest rates go down, SVRs don't go down immediately because it is up to the lender to decide whether they are going to follow the base rate. Trackers always follow the base rate.

SVRs often go UP at EXACTLY the same rate as the base rate, of course, so the lender can make more money.

So trackers are often seen as a more 'safe' bet.

YorkshireBoy

Another thing to check with providers of "tracker" mortgages is when they change the rate applied.

For example, with my tracker mortgage, YBS guarantees to change the applicable rate by the 15th of the month following month of the base rate rise. As the MPC meetings are usually at the end of the first week of the month, they "could" delay reductions by approx 5 weeks and apply increases immediately if they wanted.

I have to say though, that I have kept a close eye on YBS rate change dates over the last 3 years (both online and via statements) and to be fair, they have always both lowered or raised rates within a few days of the rate change.

YBS is good, others may not be so good.

Something to bear in mind as I think rates will fall towards the end of this year.

HTH
YB