When trackers are not trackers.

The one big attraction of a tracker mortgage is that the interest rate on your mortgage will definitely go down if the interest rate being tracked goes down. So if the mortgage is tracking the Bank of England base rate, any cuts must automatically be passed on to the borrower. This is particularly valuable when many lenders are simply not passing on rate cuts, but instead taking advantage of their cheaper borrowing to make bigger profits. But even tracker mortgages aren’t always what they seem. Many of them have conditions in the small print saying that the rates only drop until they reach a specified floor level. Even if the Bank of England base rate carries on dropping to 1%, the mortgage rate you pay will reach its floor and stay there. It’s called a collar. For example, Nationwide will not pass on any cuts if the base rate drops below 2.75%. So anyone taking out a tracker at the moment should definitely check the small print on this.