Our Tracker mortgage tracks the market which means that rather than paying a fixed interest rate, the rate you pay is variable and can change on a quarterly basis.
The main difference is that your interest rate, and your monthly mortgage payments,
can go up or down.
If you don’t want to fix your mortgage rate at today’s rates, our variable rate Tracker mortgage could be for you. It gives you have the option of choosing a mortgage with a variable interest rate that tracks the market. The variable rate Tracker mortgage is available for residential and buy to let properties, and your broker can apply regardless of whether you’re self-employed or employed.
How it works
Unlike a Fixed rate mortgage, our variable rate Tracker mortgage has a variable interest rate which is linked to our variable rate, Kensington Standard Rate (KSR), plus a fixed margin. The KSR reflects the Bank of England base rate, so with a variable rate Tracker mortgage, if the Bank of England base rate changes, your monthly payments are likely to increase or decrease.
At the end of your variable rate term, your mortgage will move to your reversionary rate (KSR plus a higher fixed margin) unless you remortgage or switch to a variable Tracker if one is available, or a fixed rate mortgage. Alternatively, you can remortgage to another lender.
What is the Bank of England base rate?
The Bank of England base rate is the interest rate set by the Bank of England’s Monetary Policy Committee (MPC). The current rate is published by the Bank of England at www.bankofengland.co.uk. It is the rate the Bank of England charges other banks and other lenders when they borrow money, so it influences the interest rates that many lenders charge customers to borrow money for things like mortgages and loans.
The interest rate we use for our variable rate Tracker mortgage
Our Tracker mortgage is based on the Kensington Standard Rate (KSR) which is a variable interest rate set by us. It is based on the Bank of England base rate (BBR) plus an adjustment of between 0% (zero) and 1%. As our rate is based on the BBR, it means that when the Bank’s rate goes up, our variable rate is likely to go up, and when the Bank’s rate goes down, our variable rate is likely to go down too.
We review the Kensington Standard Rate (KSR) four times a year on the 10th of March, June, September and December (or the immediately preceding working day if the relevant date does not fall on a working day.) The current value of KSR is published on our website under Rates, fees and charges.
If you’ve never had a tracker mortgage before, you’re likely to have questions so we recommend talking to your broker so that you fully understand the pros and cons of our variable rate Tracker mortgage. In the meantime, we’ve put together answers to some of our most frequently asked questions.
At Kensington, we’re committed to providing people with a wide range of mortgage solutions that meet different needs at different life stages. Our variable rate Tracker mortgage will give you another option when it comes to choosing the right product for your circumstances if you aren’t looking to fix your mortgage at the current time.
However, it is important to bear in mind that with a variable rate tracker, your mortgage payments could go up as well as down so you may want to speak to your broker to understand the pros and cons of our variable rate Tracker vs a fixed rate mortgage based on your particular circumstances.
The Kensington Standard Rate is a variable interest rate, set by us and reviewed on a quarterly basis. The KSR is based on the Bank of England base rate (BBR) plus an adjustment of between 0% (zero) and 1% to take account of our costs in funding a mortgage loan. Our KSR will not be set lower than the BBR or higher than 1% above the BBR at the time we set the rate.
If the Bank of England base rate is lower than 0% at the time we set the Kensington Standard Rate, we shall consider the BBR to be 0% (zero).
If the interest rate is fixed, it will not increase or decrease during the fixed rate period of the mortgage even when the market rates change. With a variable interest rate, the rate you pay will increase or decrease in line with the increase or decrease in rate that it is tracking. Where the rate includes a fixed margin, the amount of the margin will not change.
Any changes to your monthly mortgage payment will take effect from the 1st day of the following month after we review the Kensington Standard Rate (KSR), which takes place on a quarterly basis on the 10th day of the relevant month. We currently review our rates on the 10th of March, 10th June, 10th September and 10th December (or the immediately preceding working day if the relevant date does not fall on a working day.)
For new mortgage applications the KSR rate reset takes immediate effect
on our systems and documentation (normally the 10th of the month or if
this falls on a weekend, the previous working day) but after completion
the rate change applies to the customer’s mortgage payment from 1st of
the following month.
Once your mortgage has started, we will write to you at least 10 working days before your next payment is due to notify you of any changes to your payment amount following an adjustment to the Kensington Standard Rate (KSR). We also publish the latest KSR on our customer website.
If you would like to change mortgage products before the end of the variable rate term, you should seek advice from your broker about remortgaging to a new Kensington product or one from an alternative lender.
You may be liable to pay an ERC and you will find information in your offer letter.
The variable rate Tracker mortgage is not portable so if you decide to move home before the end of the variable rate term, your broker will need to apply for a new mortgage.