What is a Drop Lock Mortgage?

A drop lock mortgage is essentially a tracker mortgage with a difference. It allows you to start with a tracker and then you switch to a fixed rate loan if, or when, the base rate rises. It is a way of keeping your monthly repayments at an affordable level if the Bank of England starts hiking rates.

For example, if you have tracker mortgage that is 3% above BBR, then right now you are paying 3.5%, as the base rate is currently 0.5%. However, if interest rates start to rise, then the tracker mortgage becomes less attractive.

If base rate were to go up to substantially then your monthly payments could become quite hefty. This is where the "drop lock" bit comes in... As the base rate starts to rise, you can choose to drop out of the tracker rate when interest rates are still at a level that you feel comfortable with and lock onto a rate that means a repayment that suits you.

One of the other appeals of the drop lock mortgage is that when you switch, there is normally no early repayment charge or redemption penalty.

The trouble with finding a drop lock mortgage is that many lenders don't actually call them that. You will have to look at a lenders' tracker products and see if the option to fix is available. Alternatively, you could call one of our specialist mortgage advisers on 0845 148 9165 and they will find a suitable one for you.