Fixed vs tracker mortgage: which suits you?

A tracker mortgage is a home loan whose interest rate follows an external rate, usually the Bank of England base rate, plus a set percentage added by the lender¹. If the base rate rises, your monthly payment rises with it. If it falls, your payment falls. A fixed rate mortgage does the opposite: the rate is locked for the deal period, so your payment stays the same whatever the base rate does.

The margin is the part you agree at the start. A tracker might be described as base rate plus 1%, so with the base rate at 3.75% you would pay 4.75%². That margin is fixed for the deal period, which for trackers is most commonly two years, though deals of one to five years and lifetime trackers also exist².

The choice between the two is really a choice about who carries the risk of rates moving. With a fixed rate, the lender carries it and you pay for that certainty. With a tracker, you carry it and you may pay less, or more, as a result. Independent research published on 17 September 2026 found that trackers continue to be the only mortgage type offering rates below 4%⁴.

A tracker follows the Bank of England base rate plus a set margin

The mechanism is simple to state and worth understanding precisely, because it decides what you pay every month. A tracker mortgage has a variable rate that tracks or follows the Bank of England base rate⁹. The rate you pay is the base rate plus the percentage set by your lender¹⁰. That percentage is the margin, and it does not change during the deal.

So a tracker is not a rate the lender invents each month. It is a formula. The Bank of England sets the base rate; the lender sets the margin; the two added together give your rate. One lender describes its tracker as setting your interest rate at an agreed percentage above the Bank of England base rate, then tracking it¹¹.

The margin varies between lenders and between deals, and it is the main thing to compare when you look at two trackers. Two trackers with different margins behave identically when the base rate moves; they simply sit a fixed distance apart. Most trackers track above the base rate, so you agree a fixed percentage over it for a fixed term¹².

There is a limit to how far the formula is fixed. The lender sets the initial interest rate, and it can be set to be equal to, above or below the Bank Rate¹³. In other words, a tracker can start below the base rate, though most do not. Once the deal is running, the rate moves with the base rate rather than at the lender's discretion, which is the difference between a tracker and a standard variable rate.

Deal lengths: trackers most commonly run for two years

Trackers have an introductory deal period, most commonly two years, in the same way fixed rates do². Within that period the tracker formula applies. When the period ends, the formula stops applying and the mortgage moves to the lender's standard variable rate.

The range of terms is wider than the most common case suggests. One lender says most tracker mortgages come with an introductory rate lasting between 1 and 5 years⁶, and another says trackers generally track the base rate for a period of between one and five years, with lifetime tracker mortgages also available³. A lifetime tracker tracks above the base rate for the life of the mortgage term, so there is no deal period to end and no switch to a standard variable rate at the end of it¹⁴.

Fixed rates follow a similar pattern but with a different centre of gravity. Borrowers most commonly take out two-year or five-year fixed-rate mortgages, although three, seven, ten and even fifteen year fixed terms are available². Two and five-year fixes are the most common types of mortgage, with three, seven and 10-year fixed terms also available¹⁵.

When rates rise or fall: what happens to your payments

For a set term, a tracker rate tracks another rate, usually the Bank of England base rate, so payments go down if the rate drops and rise if it goes up¹⁶. That is the whole of the risk and the whole of the opportunity. A tracker mortgage does not tie you down to a fixed rate, so your payments could go up or down¹⁷.

The size of the movement is worth thinking about in cash terms. Independent statistics from the first quarter of 2020 found that borrowers on a variable or tracker rate would on average save between £25 and £40 a month on their monthly mortgage payment from a Bank Rate cut¹⁸. That figure is from 2020 and reflects the position then; it shows the order of magnitude rather than what any particular borrower would see today.

There is a variation that softens the downside of falling rates. If your monthly payments fall, some lenders allow you to keep your payments the same but at a lower rate, which can help you pay off your mortgage more quickly and reduce the amount of interest you pay overall¹⁹. In effect you keep paying what you were paying and the extra goes to the balance. That is a choice, not an automatic feature, and it depends on the lender allowing it.

The risk runs the other way too, and it is the reason some borrowers avoid trackers. A rise in the base rate raises your payment immediately, without the lender needing to write to you first, because the formula does the work. If your budget has no room for that, a tracker exposes you to it for the whole deal period.

Can a tracker mortgage rate go below the base rate?

It can, though most do not. The lender sets the initial interest rate, and it can be set to be equal to, above or below the Bank Rate¹³. A tracker that starts below the base rate is unusual but not impossible, and the terms of the individual deal are what decide it.

In practice, the common structure is a margin above the base rate. Tracker mortgages usually track above the base rate, so you agree a fixed percentage over the base rate for a fixed term¹². One lender describes its tracker rate mortgage as tracking above the Bank of England base rate during the initial rate period¹⁴.

The worked example lenders use makes the arithmetic clear. Take a tracker at base rate plus 1%: with the base rate at 5%, you pay 6%⁶. The margin is the same in both directions, so a base rate fall of the same size would take the rate down by the same amount.

Do tracker mortgages have early repayment charges?

Sometimes, and the answer depends on the lender and the deal rather than on trackers as a category. Early repayment charges sometimes apply if you switch before the tracker deal period ends, but quite often tracker products have no fees to exit early²⁰. One lender states plainly that early repayment charges apply during the tracker rate period on its tracker mortgages²¹.

The general rule for mortgages is that if you remortgage during the initial fixed or tracker period of your mortgage, you will likely need to pay an early repayment charge⁸. If you are still in the introductory fixed term of your mortgage you could face expensive early repayment charges when remortgaging to another lender²². The charge is usually a percentage of the amount you repay, and it is set out in your mortgage offer.

There is one important exception to the general picture. You can often switch to a fixed rate mortgage deal without an early repayment charge if interest rates go up and you feel you need the stability of a fixed rate¹⁹. Some lenders go further: there are usually no early repayment charges to switch from a Nationwide tracker²³. That matters because it means a tracker can sometimes be left for a fixed rate without a penalty, which is not true of every deal.

What rate do I move to when my fixed deal ends?

You move to your lender's standard variable rate. A standard variable rate mortgage is what you are transferred onto when a fixed, tracker or discount deal comes to an end⁷. It is set by the lender rather than by the base rate, and it is usually higher than the deal you were on.

The same applies to trackers. When the tracker deal is over, you are normally moved to the lender's standard variable rate, which is usually at a higher rate as it is set by the lender¹⁹. If you are on an introductory fixed, discount or tracker mortgage rate, your mortgage will usually move on to the lender's standard variable rate, which is invariably at a higher rate, when the term ends³.

The practical consequence is that the end of a deal is a decision point, not a resting place. At the end of your fixed period you will need to remortgage; if you do not, you will be moved to your lender's standard variable rate, which is usually much more expensive². The same warning applies at the end of a tracker period²⁴. Our guide to what to do when your fixed rate ends covers the timing, and remortgaging covers the process.

Can I switch from a tracker to a fixed rate part-way through?

Often yes, and the terms of your deal decide whether it costs anything. At the end of the term, one lender lets you either switch to a new tracker or fixed rate, or move your mortgage to its follow-on rate²⁵. Some lenders allow a switch during the deal without an early repayment charge, as above¹⁹.

If you want to move to a different lender rather than a new deal with your current one, the early repayment charge question comes back into play. Moving to a new deal with your existing lender is a product transfer; moving to a new lender is a remortgage, and the two have different costs and processes. Our comparison of remortgage or product transfer sets out the difference.

Choosing between fixed and tracker for your circumstances

The two products suit different positions, and the facts point to which is which rather than to a recommendation.

A tracker tends to suit a borrower who can absorb a rise in the monthly payment and who wants the chance of paying less if the base rate falls. The evidence that trackers have recently been the cheapest type of deal is real: trackers continue to be the only mortgage type that offers rates of less than 4%⁴. But that is a position at a point in time, not a permanent feature of the market, and it can change.

A fixed rate tends to suit a borrower who needs the payment to be the same every month for the deal period, whether because the budget is tight or because certainty is worth more than the chance of a lower rate. The trade-off is that a fixed rate does not fall when the base rate falls.

There are other mortgage types in the same family. The main categories are fixed rates, tracker rates, discount variable rates and standard variable rates²⁶. A discounted rate is a variable rate set at a discount to the lender's standard variable rate rather than to the base rate, which is a different mechanism with a different risk. Our page on discounted variable rate deals explains how they work, and fixed or discounted rate mortgage compares the two.

Where the protection is, and where it stops

A tracker mortgage is a regulated product, and the rules that apply to mortgages generally apply to it. The Financial Ombudsman Service can look at complaints about tracker mortgages, including complaints about the interest rates applied to mortgages²⁷. If a lender applies a rate that does not match the terms you agreed, that is the kind of dispute the ombudsman handles.

The protection has limits. A tracker does what it says: if the base rate rises, your payment rises, and that is not a mis-selling issue in itself. The risk you take on is the risk you agreed to. What the rules protect you against is a lender departing from the terms of the deal, not against the base rate moving.

If you are struggling with payments, free and impartial help is available. StepChange publishes a mortgage checklist and free debt advice²⁶, and Shelter Cymru provides housing and mortgage advice²⁸. Our page on falling into arrears sets out what to do if you cannot pay, and mortgage rules, your rights and protection covers the wider framework.