Nationwide, the largest mortgage provider in the UK, offers a variety of mortgage products to meet the diverse needs of homebuyers and homeowners. One of their popular offerings is their Tracker Mortgage. This guide will provide a comprehensive understanding of the Nationwide Tracker Mortgage, including its features, benefits, drawbacks, and the application process.
What is a Tracker Mortgage?
A tracker mortgage is a type of variable rate mortgage where the interest rate tracks the Bank of England (BoE) base rate at a set margin above or below it. This means your mortgage payments can fluctuate depending on changes to the BoE base rate.
Fixed Rate vs. Tracker Mortgages
Fixed Rate Mortgages
A fixed rate mortgage has an interest rate that remains constant for a specified period (e.g., 2, 3, 5 years). This ensures that your monthly mortgage payments will not change during this period.
Pros:
- Predictability: Fixed monthly payments make budgeting easier.
- Protection from Rate Increases: You are safeguarded against potential rises in interest rates during the fixed period.
- Peace of Mind: No changes in payments reduce financial stress.
Cons:
- Higher Initial Rates: Fixed rate mortgages generally have higher interest rates compared to tracker mortgages.
- Less Flexibility: You cannot benefit from decreases in interest rates during the fixed period.
- Early Repayment Charges (ERC): Paying off the mortgage early or switching to another deal during the fixed period usually incurs significant fees.
Tracker Mortgages: A tracker mortgage has a variable interest rate that follows the Bank of England (BoE) base rate plus a set margin. This means your payments can fluctuate depending on changes in the BoE base rate.
Pros:
- Potential Savings: If the BoE base rate stays low or decreases, your mortgage payments can reduce.
- Transparent Rate Changes: Interest rate changes are directly linked to the BoE base rate.
- Usually Lower Initial Rates: Tracker mortgages often start with lower rates compared to fixed rate mortgages.
- No Early Repayment Fees with Nationwide: A significant benefit of Nationwide’s tracker mortgages is the absence of early redemption fees. This means you can repay the mortgage early or switch to another tracker mortgage without incurring additional costs.
Cons:
- · Payment Uncertainty: Monthly payments can vary, making it harder to budget.
- · Exposure to Rate Increases: If the BoE base rate rises, your mortgage payments will increase.
- · Less Stability: Financial planning can be more challenging due to the variable nature of the payments.
Why Choose a Nationwide Tracker Mortgage?
Key Benefits
No Exit Fees: Unlike some tracker mortgages that impose exit fees, Nationwide’s tracker mortgage offers complete flexibility. You can repay your mortgage early or switch to another mortgage product without incurring any additional costs.
- No Fees on Some Products: Nationwide offers tracker mortgages with no product fees. This is in contrast to many other lenders who typically charge a minimum fee of £999 on tracker mortgages.
- Competitive Rates: Nationwide tracker mortgages usually have competitive rates, with only a small margin above the Bank of England base rate. This can lead to lower monthly payments when compared to fixed rate mortgages.
– Easy to Switch to a Fixed Rate If interest rates change and you prefer the stability of a fixed rate, Nationwide makes it easy to switch from a tracker mortgage to a fixed rate mortgage.
- Free Legals or Cashback on Remortgages: For those remortgaging with Nationwide, there are additional benefits such as free legal services or cashback, making the process smoother and more cost-effective.
- Great for Those with Ending Fixed Rate Mortgages: If your fixed rate mortgage is ending and you’re considering selling your property, a Nationwide tracker mortgage can be an ideal interim solution. It allows you to avoid reverting to the lender’s standard variable rate, offering you time and flexibility with no tie-ins.
Understanding Nationwide Tracker Mortgage Terms
Nationwide offers 2 tracker mortgages, one with a fee and one without a fee, the product with the fee will have a lower rate. Nationwide currently only offer 2 year tracker mortgages, not lifetime trackers, you would therefore need to re-mortgage or repay your mortgage after the 2 year period.
- 2-Year Term: Interest rate tracks the Bank of England base rate for two years.
- Post-Tracker Options: After two years, you can repay the mortgage, choose a new fixed or tracker product, or revert to Nationwide’s Standard Variable Rate (SVR).
Fee Structures
- No Fee Product: Higher interest rate, no upfront fees.
- £999 Fee Product: Lower interest rate, £999 fee (can be added to the mortgage).
It’s important to estimate the duration you’ll stay on the product and calculate total costs, including fees and interest rates, to find the cheapest overall option.
Speak to an Expert
Scenarios When a Tracker Mortgage May Be Appropriate:
A tracker mortgage is useful in scenarios where you need flexibility for overpayments, are planning to sell your property soon, or expect interest rates to fall and want to take advantage of potential rate reductions.
- Making Large Overpayments: Flexibility: If you plan to make large overpayments during the term, a tracker mortgage can be beneficial as it often allows more flexibility than the typical 10% allowance on fixed rate mortgages.
- Considering Selling the Property: Avoiding SVR and Tie-Ins: If you’re planning to sell your property soon and your deal is coming to an end, a tracker mortgage can prevent you from reverting to the Standard Variable Rate (SVR) or being tied into a long-term product.
- Expecting Interest Rates to Fall: Benefiting from Rate Reductions: If you believe that interest rates may fall, a tracker mortgage allows you to benefit from these reductions, unlike fixed rate mortgages which lock you into a higher rate.
Nationwide Tracker Mortgage Rates
Nationwide tracker mortgage rates are influenced by market conditions, the fee structure chosen, and the loan to value ratio. Typically, these rates range from 0.15% to 0.7% above the Bank of England base rate.
The interest rates for Nationwide tracker mortgages depend on several factors:
- Market Conditions: Rates can vary based on current economic conditions.
- Fee Structure: Products with higher fees often have lower interest rates.
- Loan to Value (LTV): The percentage of the property’s value that you are borrowing can affect the rate. Lower LTV ratios generally result in lower rates.
How We Can Help with a Nationwide Tracker Mortgage
We will assess whether a Nationwide tracker mortgage suits your financial situation and goals. We consider your need for flexibility, interest rate expectations, and plans for overpayments or selling the property. Additionally, we compare Nationwide’s tracker mortgage with other market options to ensure you get the best deal. We assist with gathering and preparing all necessary documents, ensuring a complete and accurate application. Throughout the process, we guide you from the initial application to final approval, ensuring a smooth and efficient experience.
FAQ’S
- What happens to my payments if the Bank of England base rate increases? – Your interest rate and monthly payments will increase if the Bank of England base rate goes up. They will usually increase the following month.
- Is there a limit to overpayments on a tracker mortgage?- Tracker mortgages typically offer more flexibility for overpayments compared to fixed-rate mortgages, which usually have a 10% annual limit.
- Is a Tracker Mortgage a Good Idea in 2024? – It depends on your risk appetite, market conditions, and personal circumstances. If you can handle potential rate increases and expect rates to fall, a tracker mortgage could be beneficial. If you prefer stability, a fixed-rate mortgage might be better.
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.
