tracker residential buy to let mortgages

Is a tracker mortgage a good idea for buy-to-let in 2024?

The Bank of England (BoE) hasn’t increased the base rate since August 2023 (as of March 2024). That’s good news for investors who previously saw the BoE increase the rate 14 times from 0.25% to 5.25% between 2021 and 2023. Even without the increases, the base rate is higher than most landlords are used to, and it poses questions around whether it’s worth overlooking a fixed-rate mortgage in favour of a tracker. 

What’s the answer? Well, it depends on many factors, including your personal circumstances. But we’ve put this guide together looking at the role of tracker rates and if they’re more appealing in a climate with higher interest rates than many are accustomed to. 

What is a tracker mortgage?

A tracker mortgage is a variable rate mortgage that follows a set margin above or below a benchmark rate, usually the Bank of England base rate. The interest rate on a tracker mortgage fluctuates in line with changes to the benchmark rate. This means monthly repayments can go up or down over the term of the mortgage depending on whether the underlying benchmark rate rises or falls.

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The buy-to-let economic landscape in 2024

While the Bank of England kept the base interest rate fixed at 5.25% on its last review, buy-to-let investors know firsthand how volatile rates have been lately. Even with the base rate at 5.25%, many lenders are lowering their own rates to be competitive in the market. So, while the base rate is high (at least compared to the last 10 to 15 years), the landscape looks somewhat more promising than it did 12 months ago. 

And remember that changes to the base rate affect tracker mortgages directly, for better or worse. So if your rental income relies on tracker mortgage financing that shifts alongside the base rate, prepare for market fluctuations to impact your monthly repayments and long-term lending costs.

Is a tracker mortgage a good idea for my buy-to-let property?

In the current market, determining the best financing options for your investment property is complex, to say the least. On one hand, a tracker rate provides flexibility. For example, if interest rates fall – as some have predicted – then you’ll benefit from cheaper monthly mortgage payments and more profit from your rental income.  

Predictions, however, are just that. There’s no guarantee that they will fall, and if interest rates rise then landlords are looking at higher monthly costs to their mortgage. That could be somewhat of a double whammy considering most investors remortgaging now are doing so from rates prior to the increases seen over the last three years. 

Ultimately, it comes down to your own circumstances and appetite for risk. There are pros and cons to tracker rate mortgages that require careful consideration before making a decision when getting a buy-to-let mortgage or remortgage

80 LTV mortgages

  • Borrow up to 80% of the property’s value
  • Get a mortgage as an individual or limited company
  • An online mortgage application that takes place entirely online.

What other options are available?

While tracker rate mortgages have their pros and cons given current financial uncertainties, they aren’t the only products on the table if you’re mortgaging or remortgaging a buy-to-let investment. It’s worth considering all avenues when investing in bricks and mortar. 

Fixed-rate mortgages may provide more payment stability without exposure to base rate market volatility. Yes, you lose out on the tracker’s potential savings if rates decline, but you also protect yourself from potential hikes. For some landlords, locking in a known, flat monthly repayment may be worth the predictable planning it allows during rockier times.

That said, no one can foresee precisely when the base rate might fall. Beyond standard tracker mortgages linked directly to the Bank of England base rate, some lenders also offer their own internal variable rate mortgages. 

With these, interest rates can still fluctuate over time, but they follow the lender’s own lending criteria rather than changes to the underlying base rate itself. They provide another flexible option, but repayment amounts depend on each lender’s rate decisions rather than the broader market.

Final thoughts: Getting a tracker mortgage buy to let in 2024

As it’s still hard to predict interest rates in 2024, as a landlord you should review the pros and cons of any mortgage type, including a tracker buy-to-let mortgage. Carefully comparing the options against your own circumstances, flow and risk appetite is what’s important. The right financing looks different for everyone’s holdings and investor mindset. 

Tracker mortgage FAQs

Yes, you can usually switch to another product or lender by remortgaging, typically with early repayment charges if you do so before your initial term expires. 

A tracker mortgage interest rate moves with a benchmark like the Bank of England base rate, while a variable rate is set by the lender.

Not always. Tracker mortgages can be cheaper in a falling interest rate environment, but fixed-rate mortgages may offer more stability when rates are rising or volatile.

Tracker rates tend to start lower than fixed-rates because you take on the risk of interest rate changes rather than fixing payments. Initial tracker savings depend on rates decreasing.

80 LTV mortgages

  • Borrow up to 80% of the property’s value
  • Get a mortgage as an individual or limited company
  • An online mortgage application that takes place entirely online.

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