Joslin Rhodes

23:07, Fri 30th July 2010

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Tracker rates

These are very similar to discount rates except that they track the BoE rate and not the Standard Variable rate. Where a discount rate is expressed as a percentage decrease from the SVR, a tracker rate is expressed as a percentage increase over the base rate.

For example if the BoE rate is 5% and the lenders SVR is 7%, a 1% discounted rate would be 7% - 1% = 6%. A 1% tracker rate would be 5% + 1% = 6%.

 

Advantages

  • Will decrease immediately if the BoE rate is lowered

 

Disadvantages

  • Will increase immediately if the BoE rate is raised
  • There is no limit as to how high or low they can go