Fixed Rate Vs Tracker Mortgage

If you’re deliberating whether a fixed-rate or tracker mortgage is best to go for right now, read on for a look in detail at both types of borrowing on your home.

Are you looking for a Tracker Mortgage?

Home Tracker Mortgages Fixed Rate Vs Tracker Mortgage
Pete Mugleston

Author: Pete Mugleston

Mortgage Advisor, MD

Updated: May 7, 2024

In the current financial climate, there’s never been a more important time to be clued up on what type of mortgage to take out. A fluctuating political and economic landscape can have huge ramifications on the cost of living and on borrowing, caused by the effect on interest rates.

It’s wise to find out more about the differences between a fixed-rate mortgage and tracker if you’re considering which might be the best for you. While it’s always advisable to get professional guidance from an impartial broker, it’s worth doing some research of your own to inform yourself too.

What’s the difference between a fixed-rate and tracker mortgage?

Essentially, the interest you pay on these two products and the features associated with each are what sets them apart.

A fixed-rate is exactly what is said on the tin – you take out a mortgage with a guaranteed rate for a specific period of time. You will know in advance exactly how much your monthly payments will be from the start of your term to the end of it – usually two, three or five years, or in some cases even longer.

A tracker mortgage is more changeable. It ‘tracks’ an external marker (usually the Bank of England’s official rate of borrowing), which can go up, down or remain the same. Lenders will then set their own rates accordingly, and you’ll likely pay a set percentage of interest on top of the base rate, depending on what deal you get.

Maximise your chance of approval with a dedicated specialist broker

Get Started

Ask Us A Question

We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different mortgage subjects.

Ask us a question and we'll get the best expert to help.

Feefo 5 Stars
1 of 3
2 of 3
3 of 3 Send!

Which one is the better option right now?

The economic uncertainty going on at the moment has seen the Bank of England raise its base rate which has in turn inflated mortgage rates. This has hit product types across the board, both new fixed-rate deals and tracker mortgages.

If the base rate begins to come back down over the next 12 to 18 months, this could make tracker mortgages more attractive for those willing to take that gamble. For those who prefer the peace of mind knowing what their mortgage repayments will be every month, then a fixed-rate deal would be better.

There will always be pros and cons of different products, but your own circumstances, prospects, attitude to risk and security all come into play when it comes to answering this question. This is where the support of a reliable and experienced mortgage advisor is invaluable when making these huge decisions.

How a broker can help you decide which is best for you

Understanding the economy’s impact on mortgages is the bread and butter of mortgage brokers, which means they are up-to-date with exactly what’s going on in an ever-changing situation. They follow what the lenders are doing, what’s going on with interest rates, what’s likely to happen next, and what the effects are on borrowers.

Approaching a broker and talking through your circumstances and what your aims are can bring a huge amount of clarity – what the advantages and disadvantages might be of the different product types and what moves might be best for you now and in the future. While they won’t produce a crystal ball, an experienced broker will be able to provide advice and in-depth insight into tracker mortgages, fixed-rate mortgages, and other options too.

We're so confident in our service, we guarantee it.

We know it's important for you to have complete confidence in our service, and trust that you're getting the best chance of mortgage approval at the best available rate. We guarantee to get your mortgage approved where others can't - or we'll give you £100*

Happy approved couple

Which one is the cheaper option?

As we’ve already outlined, the gulf between tracker and fixed-rate deals has widened significantly in a very short space of time, but to determine which one is the most cost-effective option for you, several factors need to be considered.

While you’d likely be paying less per month today with a tracker, there is always the risk that rates will rise even higher, leaving you gambling if you don’t fix, because then you will be at the mercy of a higher tracker, therefore higher mortgage repayments.

However, fixed-rates are no longer the safe option they were either, because if the base rate drops during your mortgage term instead, you could be locked in to paying a very expensive mortgage for no reason.

The markets are still yet to make long-term moves, so it’s difficult to say for certain how lenders will respond and what kinds of deals will be out there going forward.

Can you switch from one to the other?

Yes, in theory you can take control at any point and change to or from a fixed rate mortgage, however, the reason we talk about doing your homework ahead and ‘risk’ is because this comes at a price.

Both fixed-rate and tracker mortgages involve undertaking a contract which you’re locked into for a certain length of time. If you leave a deal before the term ends, you might be charged a penalty by your lender as many deals come with early repayment charges.

That said, this doesn’t mean you should avoid switching at all costs. It’s always worth doing your sums and talking to your broker to calculate whether you’d still be better off by exiting early, even with a penalty to pay. There may be instances where this is the case if your current mortgage is unnecessarily expensive or if the economic situation changes dramatically again.

What other options are available?

There are a number of other mortgage types you could look into while you’re exploring what might suit your circumstances. If you’re in the introductory rates period of an existing mortgage, you could speak to a broker about whether it’s worth moving onto your lender’s standard variable rate (SVR) in case rates drop in the near future. This can be risky and is not advised without taking professional advice first.

They also follow the base rate but lenders set their own rates, which can be expensive. If interest rates are cut, however, this would be good news for your repayments, and they don’t come with an exit fee attached, which might free you up for taking out good deals you come across at any point.

There’s also a discount mortgage to look at, which involves a special offer on an SVR for a certain amount of time. This is still interchangeable by lenders and comes with a fair amount of risk, so it’s worth reading the small print on these deals carefully.

Get matched with a broker experienced in both fixed and tracker deals

The question of whether to go for a tracker or fixed-rate mortgage right now is not straightforward. Getting the support of an experienced and impartial broker with five-star credentials and contacts across the industry will undoubtedly help your plight in finding the best deal for you.

As well as looking at your unique situation, the specialist and whole-of-market brokers we work with will help you to understand the different features of each product and assist you with securing the right mortgage when the time comes. To get matched with the right professional, contact us today for a free initial consultation on 0808 189 2301 or make an online enquiry today.

Ask a quick question

We can help!

We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different mortgage subjects.

Ask us a question and we'll get the best expert to help.

Our Brokers

Get in touch today

Make an enquiry and we'll arrange for an experienced mortgage broker we work with to contact you straight away.

1 of 3
2 of 3
3 of 3 Send!

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for Online Mortgage Advisor of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

Maximise your chances of approval, whatever your situation - Find your perfect mortgage broker

By browsing our site you consent to our use of cookies.