Halifax offers a wide range of mortgage products. The most common options are fixed and tracker mortgages. In this guide, we explain everything you need to know about the Halifax tracker mortgage, including the pros, cons, and key considerations.
Benefits of the Halifax Tracker Mortgage
- Flexibility/ Easier Switching: You can switch to other cheaper or more suitable deals with lesser penalties compared to fixed-rate mortgages.
- Lower Exit Fees: Tracker mortgages generally have lower exit fees, making it easier to move to a different mortgage if needed.
- Benefit from Rate Falls: If interest rates fall, your payments will decrease, allowing you to take advantage of lower costs.
- Flexible Overpayments: Tracker mortgages often allow for more flexible overpayments compared to fixed-rate mortgages, enabling you to pay off your mortgage faster if you choose.
- Tracks the Bank of England Base Rate. The interest rate on a tracker mortgage is directly linked to the Bank of England base rate, so you know exactly where you stand. This differs from some variable rates, which are dictated by the lender and can be less predictable.
How Do Halifax Tracker Mortgages Work?
Halifax tracker mortgages are a type of variable rate mortgage that tracks the Bank of England (BOE) base rate. The interest rate on a tracker mortgage is directly linked to the BOE base rate, which is reviewed and set by the BOE around eight times a year. Your mortgage rate and payments will react almost immediately after the BOE changes the base rate.
The rate on a tracker mortgage is usually a certain percentage above the base rate, ensuring a profit margin for the lender. For example, if the base rate is 5% and the lender charges an additional 0.5%, your mortgage rate would start at 5.5%.
Types of tracker mortgages
Halifax currently only offers term tracker mortgages, but it’s helpful to understand the different types available in the whole market:
Term Tracker Mortgages
Term tracker mortgages, like those offered by Halifax, track the Bank of England base rate for a specific period, typically between two to five years. After this period, the mortgage usually reverts to the lender’s standard variable rate (SVR). These mortgages provide the benefit of predictable tracking for a set time, making it easier to manage your finances in the short to medium term.
Lifetime Tracker Mortgages
Lifetime tracker mortgages track the base rate for the entire term of the mortgage. This means your interest rate will always follow the movements of the Bank of England base rate, providing long-term consistency in how your interest rate is determined. However, your payments will still fluctuate with changes in the base rate, which can be advantageous when rates are low but risky when rates rise.
Offset Tracker Mortgages
Offset tracker mortgages link your mortgage to your savings account. Your savings balance is deducted from your mortgage balance, and you only pay interest on the difference. This can reduce the amount of interest you pay and help you pay off your mortgage faster. Offset tracker mortgages offer flexibility and can be a good option for those with substantial savings.
What’s better: fixed or tracker?
When deciding between a tracker mortgage and a fixed rate mortgage, there are several key considerations to keep in mind.
Fixed Rate Mortgages
Fixed rate mortgages offer certainty and stability. With a fixed rate, your interest rate and monthly payments remain the same for a set period, typically between two to ten years. This predictability makes budgeting easier and protects you from interest rate rises during the fixed period.
Fixed rates can sometimes be lower than tracker rates. The borrowing rates for fixed rate mortgages are based on swap rates, which are influenced by banks borrowing money from other financial institutions. If banks can borrow money more cheaply elsewhere, fixed rates can be more attractive than tracker rates.
However, fixed rate mortgages often come with longer tie-in periods and early repayment penalties. If you want to leave the mortgage early, whether to switch deals or repay the mortgage, you may face significant exit fees.
Tracker Mortgages
Tracker mortgages offer opportunity and flexibility but also expose you to interest rate fluctuations. These mortgages track the Bank of England base rate, so your payments can go up or down in line with changes in this rate. If the base rate falls, your payments decrease, but if it rises, your payments will increase.
Unlike fixed rate mortgages, tracker mortgages usually have lower or no exit fees. This means you can repay, overpay, or switch deals with less financial impact. This flexibility can be advantageous if you plan to move or expect to make significant overpayments.
The choice between a tracker and a fixed rate mortgage often comes down to timing and your risk appetite. For example, if the Bank of England base rate is low and expected to stay low, a tracker mortgage might offer substantial savings compared to a fixed rate. Conversely, if you prefer the security of knowing your exact monthly payments and want to avoid potential rate hikes, a fixed rate mortgage could be more suitable.
Example
Consider a scenario where the Bank of England base rate is 0.5%. A tracker mortgage might offer a rate of 1% (0.5% above the base rate). If the base rate increases to 1.5%, your mortgage rate would rise to 2%. In contrast, you might secure a fixed rate mortgage at 1.8% for two years. If the base rate rises during this period, the fixed rate mortgage would save you money, but if the base rate remains low, the tracker mortgage could be cheaper.
Considerations of a Halifax Tracker Mortgage
Arrangement fees
Speak to a Tracker Mortgage Expert
When considering a Halifax tracker mortgage, it’s important to be aware of several key factors. Tracker mortgages usually have arrangement fees to ensure the banks still make a profit in case of early repayment. Halifax tracker fees are often around £999 and can usually be added to the mortgage balance, spreading the cost over the term of the mortgage rather than requiring an upfront payment.
Halifax may offer tracker mortgage products with no arrangement fees, though these typically come with higher interest rates. This can be a good option if you prefer to avoid upfront costs or if you plan to stay in your mortgage for a shorter period, as the higher rate may still result in lower overall costs in the short term.
Early Repayment Charges
One main reason clients opt for tracker mortgages is the flexibility to exit the deal early or overpay. Some trackers have no early repayment charges. However, it’s important to note that Halifax’s current tracker mortgage rates do have exit fees. These fees are usually 1% in the first year and 0.5% in the second year of their 2-year tracker. It’s essential to consider these charges if you plan on repaying the mortgage during the benefit period.
What Happens When a Tracker Mortgage Ends?
When the tracker period ends, you have several options. Your mortgage will typically revert to the lender’s standard variable rate. Alternatively, you can choose to repay the mortgage, re-fix into a new fixed-rate deal, or select another tracker product. It’s important to note that Halifax does not offer lifetime trackers, so you will need to choose one of these options at the end of the product expiry.
How can Strive help?
At Strive, we’re here to guide you through every step of the remortgaging process. We offer personalised advice on whether remortgaging is the right decision for you and keep you updated on the latest rates.
Our expertise isn’t limited to just Halifax products; we provide comprehensive advice on the entire market to ensure you find the best deal to suit your needs. Whether you’re considering a fixed rate or a tracker mortgage, we can help you understand your options and make an informed decision.
FAQ’S
- Do Halifax Offer Tracker Mortgages? Yes, Halifax offers tracker mortgages that follow the Bank of England base rate for a specified period.
- Is it a Good Idea to Take a Tracker Mortgage? Whether a tracker mortgage is a good idea depends on your financial situation and your expectations of future interest rates. Tracker mortgages offer flexibility and the potential for lower payments if interest rates fall, but they also expose you to the risk of rising rates.
- Are Tracker Mortgages Going Up? The interest rates on tracker mortgages can go up or down depending on changes to the Bank of England base rate. It’s important to stay informed about economic conditions and rate changes to understand how they might impact your mortgage payments.
Contact us today, and we’ll work hard on your behalf to find you a competitive mortgage.
For more information on mortgages for contractors, please contact a member of the Strive team, by emailing [email protected] or call us on 01273 002697.
