Most lenders offer a type of variable rate mortgage where the interest rate is linked to the Bank Rate. This set each month by the Bank of England's Monetary Policy Committee (MPC).
Base Rate tracker mortgages are charged at a set margin over the bank rate for the period of the loan. Typically, the rate charged will be the bank rate plus one per cent. The advantage of this mortgage is that the lender cannot raise its margin and charge a penal interest rate. The disadvantage of a base rate tracker is that every time the bank rate goes up, the borrower's mortgage rate and monthly payments increase automatically variable base rate trackers come with no early repayment charges, so you can switch to another product at any time.
Pros
The mortgage is Completely transparent
Mortgage cost falls instantly and automatically when Base Rate falls
Cons
Not the cheapest deals on the market
Mortgage cost rises instantly and automatically when Base Rate increases
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