Two Year Tracker Mortgages

Two-year tracker mortgages are one of the most common types of mortgages you’ll have to choose from when you sign up for a new deal. Before picking one, you’ll want to understand exactly what these mortgages track and what that means for your repayments.

We’ll explain the details, including whether a tracker mortgage is likely to rise or fall over the next two years. This will help you decide if it’s right for you, and whether you need advice before moving forward.

We’ll explain…

What is a two-year tracker mortgage?

A two-year tracker mortgage is basically a tracker mortgage with an introductory rates period that lasts for two years.

A tracker mortgage tracks the Bank of England base rate, i.e. the UK’s official rate of interest. When the base rate goes up or down, a tracker mortgage rate goes up or down too, remaining a set percentage above the base rate.

The best two-year tracker mortgage deals are around 0.5%-1% above the base rate. So, if the base rate rises by 0.25%, the tracker rate will rise at an equivalent increment. If the Bank of England base rate falls by the same percentage, tracker rates will follow suite.

Tracker mortgages are available for periods of two, three, or five years, or (less commonly) seven or ten years. At the end of your chosen period, you’ll either need to remortgage, or you’ll move on to your lender’s standard variable rate (SVR), which will likely be higher.

Tracker mortgages are one type of variable rate mortgage. The other types include standard variable rate mortgages and discounted variable rate mortgages.

To learn more, read our guide, tracker vs variable rate mortgages.

Are they a good idea right now?

While we can’t advise on whether a tracker mortgage is a good idea for you – you’d need to speak to an expert – most people prefer that their mortgage repayments stay roughly the same, or become cheaper, over time. So, a two-year tracker mortgage would suit them best when the base rate is expected to remain steady, or fall, within the next two years.

For example, if you had signed up for a two-year tracker mortgage at the start of 2020, when the base rate was 0.75%, your initial rate may have been around 1.75-2.75%. In March 2020, the base rate fell to 0.1% and remained there until December 2021, so your mortgage repayments would have become cheaper.

Since then, and up to September 2023, the Bank of England base rate has gone up 14 consecutive times in a row.

So, if you choose a two-year tracker mortgage now, you should be aware that your mortgage repayments could increase while inflation remains high. While it is also possible that they could fall at some point (since we can’t predict the future), that possibility currently looks much less likely.

Other variable rate mortgages are also likely to rise, and could potentially rise by more than the Bank of England base rate. Fixed-rate mortgages, on the other hand, will remain the same throughout the initial term (e.g. two years, three years, or five years).

How to compare deals

There are a variety of two-year tracker mortgages on the market now, ranging from about 1% to 1.75% above the Bank of England base rate. To find the best one that you’re eligible for, you should speak to a broker who has whole-of-market access.

A broker will also discuss your other mortgage options with you. These include three-year or five-year tracker mortgages. This gives you a longer period before you move onto your lender’s standard variable rate, which will be higher than the tracker rate. Another option is a fixed-rate mortgage, which might be more suitable for your needs over the next two years.

Finally, if there are ways that you can improve your application to get a better rate, your broker will advise you on these. Adding a little more to your deposit can sometimes give you access to more mortgage deals, or waiting for a particular incident to expire from your credit report. If you’d like to speak to a broker, get in touch.

Lenders who offer these mortgages

Many of the biggest names on the high street offer two-year tracker mortgages, including…

• Barclays
• HSBC
• Nationwide
• Santander
• TSB

They are also available from smaller and more specialist lenders, who may offer better rates.

Given that the market is vast, it’s advisable to have a mortgage broker compare every available deal for you, rather than approaching a lender direct, to make sure to land the best rates.

Do existing customers get better rates?

Not necessarily. Some tracker mortgage lenders, including Barclays, will offer an exclusive, lower tracker rate if you’re an existing mortgage customer (EMC). This is to incentivise you to remain with them rather than comparing rates across the market, when it’s time to remortgage.

If you speak to a broker before signing up for this exclusive rate, they will compare it to any other deals that are currently available, which may be cheaper.

They will give you an honest and transparent answer about whether you’re better off staying with your current lender or applying to a new lender – or changing to a different type of mortgage.