Tracker mortgages explained

A tracker mortgage is a home loan whose interest rate is based on an external rate, usually the Bank of England base rate, plus a set percentage¹. If your tracker is "base rate plus 1%" and the base rate is 3.75%, you pay 4.75%². When the Bank of England changes Bank Rate, your rate moves with it, up or down, by the same amount.

Bank Rate is currently 3.75%, a level it has held since December 2025³. The Bank of England sets it, describing it as the core interest rate in the UK and the rate of interest it pays to commercial banks, building societies and financial institutions that hold money with it⁴. The Monetary Policy Committee votes on it roughly every six weeks, usually eight times a year⁵.

That direct link is what separates a tracker from every other variable mortgage. A lender's own standard variable rate can be changed by the lender at any time, for any reason. A tracker rate cannot: it is a formula, Bank Rate plus your margin, and the margin is fixed for the life of the deal.

How a tracker mortgage works: base rate plus a set margin

The rate on a tracker mortgage is not a number the lender picks each month. It is the Bank of England base rate plus a set margin, for example the base rate plus 1%⁵. The margin is agreed when you take the deal and stays fixed for as long as the deal runs. Shelter Cymru's guidance puts it plainly: with a tracker mortgage, the interest rate exactly follows the Bank of England base rate plus a specified percentage⁷.

The margin can be set above, below or equal to the Bank Rate, and it is the lender that sets it initially⁸. That is why two trackers can charge very different amounts at the same moment: a "base rate plus 0.5%" deal and a "base rate plus 2%" deal both move in step with the Bank of England, but the gap between them never closes, because each keeps its own margin for the whole of the initial rate period. When comparing trackers, the margin is the number to compare, because it is the only part of the rate the lender controls.

Because the rate is a formula rather than a decision, a tracker behaves predictably in both directions. If Bank Rate falls by 0.25 percentage points, your rate falls by 0.25 percentage points on the same terms. If Bank Rate rises, your rate rises with it. The Financial Ombudsman Service, which handles complaints about the interest rates applied to mortgages, describes tracker mortgages as mortgages which follow, or track, the Bank of England's base rate⁹.

The margin is fixed, but the deal period is not unlimited. Like fixed-rate mortgages, trackers have an introductory deal period, most commonly two years². What happens after that, and the charges that can apply if you leave early, are covered further down this page.

Bank Rate at 3.75%: what your tracker follows

Bank Rate is 3.75% now³. It is the rate of interest the Bank of England pays to commercial banks, building societies and financial institutions that hold money with it, and the Bank describes it as the core interest rate in the UK, which it is the Bank's job to set⁴. In law, the "Bank of England base rate" means the rate announced from time to time by the Monetary Policy Committee of the Bank of England as the official dealing rate, being the rate at which the Bank is willing to enter into transactions for providing short-term liquidity in the money markets¹⁰.

The Committee votes roughly every six weeks, usually eight times a year⁵. Following its September 2026 decision, the Bank announced its next decision would come on Thursday 5 November 2026³. The schedule is normally fixed well in advance, but it is not absolutely rigid: the MPC can act between scheduled meetings, as it did in March 2020, when it reduced the base rate due to the potential effects of the coronavirus on the economy⁵.

The recent history explains why tracker margins matter so much. Bank Rate rose from 0.1 per cent in late 2021 to reach 5.25 per cent by August 2023¹¹, a period in which interest rates saw 14 consecutive increases across just 20 months. In 2024 the base rate was cut four times, each by 0.25 percentage points, in February, May, August and December⁵. There were four further cuts in 2025, in February, May, August and December¹², the December cut taking the rate to 3.75%, where it has stayed⁵. A borrower on a tracker lived through every one of those moves in their monthly payment.

What happens to your payments when the base rate moves

When Bank Rate changes, the interest rate on a tracker mortgage changes with it, and so does the monthly payment. Barclays, which offers tracker mortgages, tells its customers that the amount they pay each month could go up or down if the Bank of England base rate changes¹⁴. Virgin Money's guidance states the same mechanism from the other direction: as tracker mortgages are directly linked to the Bank of England Base Rate, the interest rate on the mortgage will always move in line with any changes¹⁵.

The size of the move usually matches the size of the Bank Rate change. Central banks usually change their rates by 0.25%, though the Bank of England can alter Bank Rate by as little or as much as it needs to⁶. On a repayment mortgage, a rate change alters the split between interest and capital in each payment: when the rate falls, more of the same monthly payment goes towards paying off the loan itself.

This is the practical difference between a tracker and a standard variable rate mortgage. An SVR is the default rate a borrower is transferred onto when a fixed, tracker or discount deal comes to an end¹⁶, and the lender can move it whenever it likes, by whatever amount it likes, whether or not Bank Rate has moved. A tracker borrower knows exactly what their rate will be the day after any Bank of England announcement; an SVR borrower does not.

The direction of travel matters for choosing between a tracker and a fixed rate. In the recent market, trackers have been the cheaper option at the point of taking a deal: in June 2026 they were offering borrowers the lowest rates, though only marginally below 4%¹⁸, and by September 2026 trackers continued to be the only mortgage type offering rates of less than 4%¹⁹. The trade-off is that a tracker's rate is not guaranteed to stay where it starts, while a fixed rate is.

Collars and caps: limits on how far your rate can move

A tracker's link to Bank Rate is fixed, but some trackers put a limit on how far the rate can travel. Some tracker mortgages come with a collar, which means the rate can only fall to a set level²⁰. If your tracker is collared at, say, a floor above zero and Bank Rate falls below the point where the formula would take your rate under that floor, your rate stops at the collar and the benefit of further cuts stops with it.

The same family of products includes caps, which work in the opposite direction. With a capped and collared rate mortgage, the lender may not be able to increase the rate above a certain amount, called a cap, or reduce it below a certain floor, called a collar⁸. A cap protects the borrower against rises; a collar protects the lender against unlimited falls. A tracker with a cap is a different, more complex product than a pure tracker, and the dedicated page on capped rate mortgages covers how those work.

There is also a floor that has nothing to do with your specific deal. Some lenders state in their tracker terms that the interest rate will not go below 0.00%¹⁵. That clause exists because Bank Rate has been very low within living memory: it stood at 0.1% at the start of the Covid-19 crisis¹¹, and a tracker formula could in principle have produced a negative rate had Bank Rate fallen further. The 0.00% floor removes that possibility.

Term trackers and lifetime trackers

Most trackers are term trackers: they run for an introductory deal period, most commonly two years², and then end. Like a fixed rate deal, the margin and the deal period are agreed at the start, and the early repayment charges that apply during the deal are agreed at the same time.

Lifetime trackers work differently. Instead of running for a set deal period, they track the Bank of England base rate for the life of the mortgage, so there is no end-of-deal jump to a standard variable rate and no need to remortgage at the end of a term¹. The trade-off is usually the margin: because the lender is committing to a rate that follows Bank Rate indefinitely, lifetime trackers tend to carry a higher margin over the base rate than short-term deals, and the comparison depends on the deals available at the time.

Which tends to suit whom is a question of circumstance rather than a ranking. A short tracker suits a borrower who wants the lowest possible margin now and is content to review the market when the deal ends, accepting the work of remortgaging. A lifetime tracker suits a borrower who values not having to keep switching, and who is comfortable that the rate will follow Bank Rate for decades, in both directions. The page comparing a fixed rate with a tracker sets the two side by side.

One thing a lifetime tracker does not change: the mortgage itself still has a term. At the end of the mortgage term, if all repayments have been made, the mortgage will be repaid and the borrower owns the property outright⁸. The tracker is the rate, not the loan.

Overpayments and early repayment charges

Because a tracker rate falls when Bank Rate falls, many borrowers use the savings to pay down the loan faster. On most mortgages you can pay more than your contractual monthly payment; Barclays, for example, tells tracker customers they could pay more than their contractual monthly payment, and that it will let them know if there are any overpayment limits or early repayment charges before they take out a specific mortgage¹⁴. The rules on paying extra are set out in full on the page about making overpayments.

The bigger cost to watch is the early repayment charge. If you remortgage during the initial fixed or tracker period of your mortgage, you will likely need to pay an early repayment charge²¹. The charge exists because the lender has committed to a margin for the deal period, and it applies to more than remortgaging: repaying the mortgage in full, moving it to another lender, or in some cases overpaying beyond an allowance can all trigger it. How the charge is worked out, and how much of the loan it is percentage is applied to, varies between lenders and is set out in each mortgage illustration and offer.

The dedicated guide to early repayment charges covers the detail, and mortgage fees and charges covers the other costs of taking out a deal. As a rule of thumb, the longer the deal period, the longer the window in which the charge can apply.

When a tracker deal ends, the rate usually moves to the SVR

When a term tracker's deal period ends, the borrower does not stay on the tracker margin. A standard variable rate mortgage is what you will be transferred onto when a fixed, tracker or discount deal comes to an end¹⁶. The SVR is the lender's own rate: the lender sets it, and can change it at any time, with no direct formula linking it to Bank Rate.

The SVR is usually more expensive than the deal it replaces, and it is where the so-called loyalty penalty comes from: borrowers who do nothing at the end of a deal can end up paying their lender's default rate indefinitely. The options at that point are to remortgage to a new deal with any lender, to arrange a product transfer with the same lender, or to stay on the SVR. The page comparing a remortgage with a product transfer sets out the differences.

Timing matters, because the rate you move to depends on where Bank Rate, and the market, stand when your deal ends. The Bank of England indicated in early 2026 that it would continue to slowly reduce the base rate in 2026, with it possibly stabilising by the end of the year¹². Earlier analysis had expected Bank Rate to fall by just 1.25 percentage points in the three years after its peak to reach around 3.5 per cent²². Nobody can promise where Bank Rate will be even six weeks ahead, which is the essence of a tracker: the rate you pay is tied to decisions that have not yet been made.

Borrowers coming to the end of a deal can often secure a new rate in advance, and the page on securing a new rate early explains how far ahead this is possible.

Who can get a tracker mortgage and how to apply

A tracker is a type of rate, not a separate kind of borrowing, so eligibility is mortgage eligibility. You can apply for a mortgage direct to a building society, or other type of lender, or alternatively use a regulated mortgage broker to help you²³. The protections of mortgage regulation apply to individuals and trustees: a company borrowing for its business with a mortgage over company property is not covered by the regulated mortgage contract rules²⁴. What a lender will lend, and against what loan to value, depends on affordability, which the page on how much you can borrow explains.

The usual first step is a mortgage in principle. Getting a decision in principle usually involves a credit check, so it is worth doing this only when formally applying for the mortgage, or if an estate agent asks for one to check you are a credible buyer²⁵. The full application then involves evidence of income and outgoings, a valuation or survey of the property, and a formal mortgage offer whose terms, including the tracker margin, the deal period and any early repayment charge, are binding.

Trackers are not limited to home purchases. They are among the rates available on remortgages, on buy-to-let mortgages, and on other products. If you already have a residential mortgage and want to rent out your home, some lenders will grant a consent to let on the current deal, while others may insist on switching to a buy-to-let mortgage²⁶. Whether to apply direct or through a broker is covered on the page about brokers and advice.

If something goes wrong, a borrower can complain to the lender and then to the Financial Ombudsman Service, which can look at complaints about the interest rates applied to mortgages⁹. The page on complaining to the ombudsman explains the process, and the page on mortgage rules and your rights sets out the protections that apply to every regulated mortgage.