Fixed vs Tracker Mortgage: Which One Should You Choose?

Fixed or tracker? It's one of the first questions any mortgage advisor will ask you, and the answer can mean tens of thousands of pounds across the life of your loan. So how do you actually choose?

The right answer depends on your circumstances — and your tolerance for surprises. Here's how each type works, what to weigh up, and how to think about the trade-off.

What is a fixed rate mortgage?

A fixed rate mortgage locks your interest rate at a set level for a specified period, typically 2 to 10 years. Your monthly payment stays the same throughout. No matter what happens to the Bank of England base rate or the wider market, your rate doesn't move.

At the end of the fixed period, the rate reverts to the lender's standard variable rate (SVR) — which is usually significantly higher than your fixed rate was. Most people remortgage to a new deal before that happens.

The appeal of a fixed rate is straightforward: certainty. You know exactly what you're paying each month for the entire fixed period. Budgeting becomes simple. Rate rises don't touch you. The trade-off is that you can't benefit if rates fall during your fix.

What is a tracker mortgage?

A tracker mortgage's rate is tied directly to the Bank of England base rate, usually with a margin added on top. So if the base rate is 5.0% and your tracker margin is 0.75%, your rate is 5.75%.

When the base rate moves, your tracker moves with it — usually within a month. If the base rate drops 0.25 percentage points, your rate drops 0.25 percentage points. If it rises 0.5 points, your rate rises 0.5 points.

Tracker deals typically last 2 to 5 years, after which you revert to the SVR (or remortgage). Some trackers have no fixed end date and continue indefinitely — these are often called "lifetime trackers".

How tracker rates are set

The tracker rate is simply the Bank of England base rate plus a fixed margin chosen by the lender. So:

Tracker rate = Base rate + Lender's margin

The margin varies between lenders and deals. A typical 2-year tracker might have a margin of 0.5% to 1.5%. The smaller the margin, the better the rate — though smaller margins are usually only offered with bigger deposits and stronger credit.

Some trackers have a "collar" — a minimum rate below which they won't drop, even if the base rate falls further. So a tracker with a 0.5% margin and a 1.5% collar would stay at 1.5% even if the base rate fell to 0%. Always check whether your tracker has one.

Fixed vs tracker — the key differences

Side by side:

• Predictability: Fixed gives total certainty. Tracker can move every month.
• Headline rate: Trackers often have a slightly lower starting rate than equivalent fixes — but the rate can rise.
• Best when rates fall: Tracker — you benefit immediately.
• Best when rates rise: Fixed — you're protected.
• Early repayment charges: Both can have them, but fixed-rate ERCs are usually higher.
• Overpayments: Both usually allow some overpayment (typically up to 10% per year), but trackers tend to be more flexible.
• Budgeting: Fixed makes it easy. Tracker means your monthly payment can change.

Run both through our mortgage repayment calculator at different rates to see how much the monthly payment can swing.

When a fixed rate makes more sense

A fixed rate is usually the right choice when:

• You value certainty. You want to know exactly what you'll pay each month.
• Your budget is tight. Even a small rate rise could put pressure on your finances. A fix protects you.
• You expect rates to rise. Locking in now means the rises don't reach you for the duration of the fix.
• You're a first-time buyer. The certainty helps you settle into homeownership without rate-related surprises.
• You're planning life changes. Children, sabbatical, business launch — anything that affects income makes rate certainty more valuable.

Most UK mortgages are on fixed rates. For people who want one less thing to think about, a fix is the easy answer.

When a tracker might be worth considering

A tracker can work better when:

• You expect rates to fall. You'd benefit from every reduction without having to remortgage.
• You can absorb rate rises. If your income comfortably handles a 1-2% rate increase, the flexibility of a tracker might be worth it.
• You want more flexibility on overpayments. Some trackers allow unlimited overpayments — useful if you expect bonuses or windfalls.
• You might move or pay off the mortgage soon. Lower ERCs on trackers can save money if you exit early.
• You're remortgaging on a short timeline. A 2-year tracker can act as a bridge if you expect to refinance again soon at a better rate.

Lifetime trackers in particular suit borrowers who value long-term flexibility over rate-by-rate certainty.

What about discount rate mortgages?

Discount mortgages are a third option that don't get talked about as much. They give you a discount off the lender's SVR for a set period.

So if the SVR is 7.5% and the discount is 2%, you pay 5.5%. When the SVR changes (which lenders can do at any time), your rate changes by the same amount.

Discount mortgages sound similar to trackers but they're riskier — the lender controls when the SVR moves, not the Bank of England. A lender can raise its SVR even when the base rate hasn't moved, so your payment can go up without warning. For most borrowers, fixed or tracker is preferable.

Early repayment charges — what you need to know

Early repayment charges (ERCs) are penalties you pay if you exit your deal before it ends. They typically apply to:

• Paying off the mortgage in full early
• Switching to a different product or lender mid-deal
• Overpaying above the agreed annual limit (often 10% of the balance)

Fixed rate ERCs are usually a percentage of the outstanding balance — often 5% in year one of a 5-year fix, dropping by 1% each year. Tracker ERCs are usually smaller or sometimes nonexistent.

If you might want to move, pay off, or refinance early, factor the ERC into your decision. A 5% ERC on a £200,000 mortgage is £10,000 — not a small consideration. The mortgage overpayment calculator can help you plan how to maximise overpayments within the limit.

How to decide which is right for you

A few practical questions to ask yourself:

1. Can you cope if rates rise 1-2%? If yes, a tracker is on the table. If no, fix.
2. How long do you want certainty for? Two years? Five? Ten?
3. How likely are you to move home or pay off early? The more likely, the more important small ERCs are.
4. Do you expect to overpay regularly? If yes, look at the overpayment terms carefully.
5. What's your view on where rates are headed? If you genuinely expect cuts, a tracker captures them. If you expect rises, a fix protects you.

Most borrowers end up on fixed rates because the certainty matches the size of the commitment. But trackers and longer fixes (10 years+) both have their places.

Should you use a mortgage broker?

For something this consequential, almost always yes. A good broker:

• Has access to deals you can't get directly
• Can model fixed vs tracker scenarios for your specific finances
• Knows which lenders favour borrowers like you
• Runs soft searches before committing to a hard application
• Saves you hours of comparison work

Most brokers either charge a flat fee (£300-£700), a percentage commission, or are paid by the lender. Always ask upfront how they're paid and whether they're whole-of-market or restricted to certain lenders. The cost is usually a fraction of what they save you over the life of the mortgage.

Frequently asked questions