A tracker mortgage works in a similar way to a standard variable rate mortgage in that it follows rate imposed by Bank of England. Whereas standard variable rate mortgage changes monthly or annually a tracker mortgage usually guarantees to follow changes in bank base rate within 14 days of it happening. Thereby borrower benefits from both falls and rises in interest rates sooner.

A tracker rate is one that has a fixed differential to Bank of England rate and is contractually bound to change within a certain time of Bank changing its rate. Thus, tracker mortgage might follow base rate up and down as it fluctuates. The mortgage lender will make profit by charging an amount over base rate.

To cover balance, borrowers are advised to make regular contributions into an investment policy alongside their mortgage repayments. This can be arranged by mortgage provider, most commonly in form of an endowment mortgage, an ISA mortgage or a pension mortgage.

With this type of mortgage, mortgage lender is advancing you money and asking you to do no more than pay interest each month. In other words you are merely servicing debt, and amount outstanding on your mortgage will remain constant.

An interest only mortgage can be an excellent choice for some borrowers, who have a valid use for a lower initial required payment. The actual capital which is freed up to pay for your property can be invested into a long term investment fund, which, if invested carefully, ought to help pay off both your mortgage earlier than expected, and may even be used to cover cost of your interest only mortgage payments.

With interest only mortgages, most borrowers take out some kind of savings plan to ensure that at some time in future they will have enough money to pay off their mortgage and have satisfaction of knowing that bricks and mortar belong to them.