Certificate in Mortgage Advice and Practice (CeMAP) 2 Practice Exam

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Which of the following could be considered an advantage of a tracker rate mortgage over a standard variable-rate mortgage offered by the same lender?

An arrangement fee is unlikely to be payable.

An early repayment charge is unlikely to apply.

The interest rate charged is likely to be lower.

Tracker rate mortgages have a rate that moves in line with a reference rate (usually the Bank of England base rate) plus a fixed margin. Because of this, when the base rate is low, the total rate can be lower than the lender’s standard variable rate (SVR) used for other mortgages from the same lender. That potential for a lower ongoing cost is the main advantage of a tracker rate over an SVR, especially in periods when base rates are at or near their lows.

The other ideas aren’t inherent advantages of choosing a tracker over an SVR. Arrangement fees and early repayment charges depend on the specific product and lender, not on the fact that the rate tracks a reference rate. And a tracker doesn’t automatically come with a cap that prevents the rate from rising above a certain level unless the product is specifically described as a capped tracker.

The interest rate charged will not exceed a predetermined level.