Two Year Tracker Mortgages

During the introductory rates period of a tracker mortgage, your monthly payments will be determined by an external marker – usually the Bank of England’s base rate – before the lender’s standard variable rate kicks in. These initial rates can last for a set period of time, but in this article, we’ll focus on tracker mortgages with a two-year introductory rate period.

Here, we’ll look in detail at two year tracker mortgages, the pros and cons, the sort of rates you can expect and why a broker is essential to helping you secure the mortgage you need.

What is a two year tracker mortgage?

A tracker mortgage is a variable rate mortgage which follows, or ‘tracks’, a standard recognised interest rate, normally the Bank of England base rate, sometimes called the BEBR. This is different from a standard variable rate (SVR), which is set at a lender’s discretion and not tied to a particular external rate.

A tracker mortgage tracks slightly above the rate it’s following. For example, if a mortgage interest rate is advertised as BEBR +1% then if the base rate was 2%, your mortgage rate would be 3%. An increase in the base rate to 2.5% would push your rate to 3.5%.

A two-year tracker mortgage is agreed for a two year term only. At the end of the term you will be automatically transferred to a lender’s SVR mortgage unless you remortgage.

Benefits of a tracker mortgage right now

A tracker mortgage is normally a more popular option when interest rates are expected to either stay the same or fall, as unlike a fixed-rate mortgage a tracker mortgage allows you to benefit from a drop in rates.

At the time of writing (August 22) most experts are predicting rates to increase as the Bank of England struggles to control rising inflation driven by increases in fuel and food costs. So why would you want a tracker mortgage when interest rates are predicted to go up?

One of the main benefits of a tracker mortgage is that it is easier to find one with no early repayment charges. This makes a two year tracker mortgage particularly flexible as a short term mortgage option if you know that you plan to sell your home or are going to want a different mortgage within the next two years. It also means you will be able to make larger overpayments that you would on a fixed rate mortgage, so perhaps you are expecting a large bonus or inheritance and want the option to pay a large chunk off your mortgage without incurring penalties.

Two year tracker mortgages are often cheaper initially than fixed rate mortgages because with the fixed rate you’re paying extra for the security. If you can find a very cheap two year tracker rate you could give yourself some scope for it to increase a little and still be cheaper than a fixed rate mortgage.

What are the downsides?

The main disadvantage of a tracker mortgage in the current economic climate is that it’s very likely to end up costing you more as interest rates rise. If you are on a fixed income with little scope for absorbing higher mortgage repayments, then it’s unlikely that a two year tracker is going to be a better option for you right now than a fixed rate mortgage, which gives you set repayments for the whole of the term.

You also need to be cautious and check if your tracker mortgage has a collar, sometimes called a floor – a set rate which it can’t fall below. Sometimes the best initial deals have collars set at the rate you start on, meaning you will never be able to benefit from an interest rate fall.

Which lenders offer the best two year tracker mortgages?

Take a look at our rates table below to get an idea of the deals currently available for two-year tracker mortgages and which lenders offer them.

Please note that the rates cited above are examples of the current deals on offer at the time of writing (May 2023) and are subject to change.

How a broker can help you secure the best two year tracker rates

With so many different rates and product features to choose from, you can spend hours, if not days, researching the best two year tracker mortgage deals and still potentially miss out on discovering all the lenders available.

Using a broker who specialises in tracker mortgages not only saves you a lot of valuable time, but you’ll also rest easy knowing that they have a much broader and deeper knowledge of the market than you could ever hope to achieve through a search engine.

Not only will a broker be able to compare two year tracker rates and terms across dozens of lenders, but they can also look in more detail at your financial situation and make sure that you explore all of your options, including different mortgage types and a variety of length tracker terms.

Make a quick online enquiry now and we can match you with the broker who’s right for you.

Do existing customers get better deals?

While you may find that your existing lender is prepared to offer you a better rate on a two year tracker than it would to a new customer, it’s important to remember that just because it’s a good deal for that lender, doesn’t mean it’s the best deal for you.

As tempting as it might be to go for ease and stick with your current lender, be wary of getting lured in by exclusive Existing Mortgage Customer or EMC Reward rates without doing more research. Your broker will be able to look at the whole mortgage market and compare rates not just from that lender but across a vast range of products, making sure that you’re getting the very best rates.

Get matched with a specialist tracker mortgage broker

The current economic climate makes a two year tracker mortgage an unpredictable option, so it’s essential that you work with an expert broker to choose a product that’s appropriate for your circumstances and isn’t going to leave you unable to make repayments should interest rates increase.

Give us a call on 0808 189 0463 or make an online enquiry and we’ll look at your needs and match you with a broker who has the right combination of skills and experience to ensure that you get the tracker mortgage you need. All of the advisors we work with have been pre-vetted by us and our broker matching service is completely free of charge.