Tracker/variable that 'does not go down/ follow base rate

alberto2012

Hi.

My wife and i were recently discussing our 1st mortgage options with financial advisor...
We were tempted with a 2year tracker mortgage at 3.29% =£414 per month..

But it wasn't until I read over the details that I discovered that even should the bank of eng base rate go down, the rate offered does NOT "go below a floor of 3.29%" ?! But it can go up?

Is this the norm?

Not really a tracker mortgage is it?

System

alberto2012 wrote: »

Hi.

My wife and i were recently discussing our 1st mortgage options with financial advisor...
We were tempted with a 2year tracker mortgage at 3.29% =£414 per month..

But it wasn't until I read over the details that I discovered that even should the bank of eng base rate go down, the rate offered does NOT "go below a floor of 3.29%" ?! But it can go up?

Is this the norm?

Not really a tracker mortgage is it?

It is the norm yes. Its called a collar and most trackers have it. To be fair though in the current situation its not really an issue as the base rate cant really fall much further anyway!

Morgage_Confused

Would be more concerned about what happens after the two years? Does it still track or does it go to a SVR?

ACG

The reason its there is that a lot of mortgages in the past never had a lower limit so people now are on interest rates of maybe 0.1% or 0.2% - this isnt enough to help them pay interest on savings accounts.

As has been mentioned its called a collar but interest rates are very unlikely to drop below their current 0.5% rate (not impossible but unlikely) so i wouldnt worry too much.

alberto2012

Morgage_Confused wrote: »

Would be more concerned about what happens after the two years? Does it still track or does it go to a SVR?

Changes to a SVR in Aug 2014 (currently at 5.99%)....

Morgage_Confused

Ouch......are there no decent lifetime trackers left now?
You would be looking to re-mortgage in 2 years time at that kind of SVR.