Fixed vs tracker mortgages
How fixed, tracker and standard variable rate mortgages differ, and what to compare.
The short answer
A fixed-rate mortgage keeps the same interest rate for a set period, usually two or five years, so your payment does not change. A tracker mortgage follows another rate, usually the Bank of England base rate, plus a set margin, so your payment can go up and down. A standard variable rate (SVR) is the lender's own rate, which it can change at any time, and is usually where you land when a deal ends.
Fixed-rate mortgages
- Pros: predictable payments, which makes budgeting easier, and protection if rates rise.
- Cons: you do not benefit if rates fall, and leaving early usually costs an early repayment charge, often a percentage of the balance.
- Best for: people who need certainty and have a tight budget.
Tracker mortgages
- Pros: you benefit straight away if the base rate falls, and some have no early repayment charge.
- Cons: payments can rise at short notice if the base rate rises.
- Best for: people who can afford higher payments, or who want flexibility to leave.
What happens when the deal ends
When a fixed or tracker deal ends, you normally move to the lender's SVR, which is often higher. Start looking about six months before the end date. Many lenders let you lock in a new rate in advance, and you can usually switch without a new affordability check. Use the mortgage calculator to compare payments at different rates.
Things to compare beyond the rate
- Arrangement fees, which can be added to the loan but then attract interest.
- Early repayment charges and whether you can overpay each year. See is it worth overpaying your mortgage.
- Whether the deal is portable if you move home.
- The total cost over the deal period, not just the monthly payment.
Where to learn more
This guide is for information only and is not mortgage advice. A mortgage broker or adviser can recommend a product for your circumstances.