Fixed or tracker mortgage: which should you choose?
A fixed rate buys certainty at a price; a tracker bets on the Bank of England. How to compare them properly - and the one question that settles it for most people.
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A fixed-rate mortgage locks your interest rate for a set period (usually 2 or 5 years) - your payments don’t change. A tracker follows the Bank of England base rate plus a margin, so your payments move with it. Neither is “better”; the right one depends on your budget, your risk tolerance and the rates on offer. Mortgages are regulated by the Financial Conduct Authority; this guide is general information, not financial advice.
What is a tracker mortgage?
A tracker mortgage is a variable-rate deal that follows the Bank of England base rate at a set margin above it - for example, base rate + 1%. When the base rate moves, your lender moves your rate with it, usually within a month, so your monthly payments go up or down in step. The margin (the “+1%” part) is fixed for the deal, so you always know exactly how far above the base rate you sit. This is different to a fixed-rate mortgage, where your rate and payments stay exactly the same for the whole deal period regardless of what the base rate does. Trackers are typically 2 to 5 years, sometimes lifetime, and the main reason to pick one is that they are often cheaper at the start and usually have no early repayment charge - the trade-off is that you carry the risk if rates rise.
How they compare
| Fixed rate | Tracker | |
|---|---|---|
| Payments | Predictable for the fix period | Move when the base rate moves |
| Cost | Usually a little higher than trackers | Usually a little lower at the start |
| Risk | No base-rate risk while fixed | Full base-rate risk (up or down) |
| Early repayment charge | Typical 1–5% if you exit early | Usually none, or smaller |
| Best for | Budget certainty, tight finances | Flexibility, or if rates are falling |
The real difference: the ERC
The part most people overlook is the early repayment charge (ERC). On a fixed deal you usually can’t overpay more than 10% a year without penalty, and moving house or remortgaging early can trigger a charge of 1–5% of the balance - £2,500–£12,500 on a £250,000 loan. Trackers typically have no ERC (or a short one), which makes them the flexible option if you might move, overpay heavily or sell soon.
The decision framework
- Choose fixed if: your budget can’t absorb a rate rise, you’re a first-time buyer on tight margins, or you simply want to sleep at night for 2–5 years
- Choose tracker if: you have flexibility to absorb rises, you expect to move or overpay heavily, or base rates are falling and the tracker margin looks thin
- The 10% rule: if the fixed rate is more than ~0.5% above a comparable tracker, the certainty is expensive - run the numbers before paying for it
- Never sit on the standard variable rate (SVR) - it’s almost always the most expensive option, and you can switch without ERC once your deal ends
Most borrowers should compare a 5-year fixed against a 2-year tracker and ask one question: “If rates rose 1% tomorrow, could my budget take it?” If the answer is no, buy the certainty. If yes, the tracker often wins on cost.
Frequently asked questions
Frequently asked questions
What is a tracker mortgage?
A tracker mortgage is a variable-rate deal that follows the Bank of England base rate at a set margin above it, for example base rate plus 1%. When the base rate changes, your lender changes your rate too, usually within a month, so your monthly payments go up or down in step. The margin above the base rate is fixed for the deal, and the deal typically runs for 2 to 5 years (sometimes lifetime). Trackers are often cheaper than fixed rates at the start and usually carry no early repayment charge.
Is a tracker or fixed mortgage better?
Neither is better outright; it depends on your budget and risk tolerance. A fixed rate is better if you need certainty and your budget cannot absorb a rate rise, for example if you are a first-time buyer on tight margins. A tracker is often better if you have flexibility to absorb rises, you expect to move or overpay heavily (trackers usually have no early repayment charge), or you think base rates will fall. As a rule of thumb, if the fixed rate is more than about 0.5% above a comparable tracker, the certainty is expensive and you should run the numbers before paying for it.
How does a tracker mortgage work?
A tracker sets your interest rate at a fixed margin above the Bank of England base rate, such as base rate plus 1%. Every time the Bank of England changes the base rate, your lender adjusts your rate to match, usually within a month, and your monthly payment changes with it. The margin above the base rate stays the same for the whole deal, so you always know how far above the base rate you sit - you just don’t know what the base rate will do. The deal runs for a set term (often 2 to 5 years) and most trackers have no early repayment charge, so you can overpay or switch without a penalty.
Source: MoneyHelper - fixed, tracker and other mortgages — Deal types and ERCs checked August 2026
How much can I borrow?Your budget is the starting point for any deal choice.Mortgage broker costsA broker can run the fix-vs-tracker numbers for your exact case.
Sources
- MoneyHelper - fixed, tracker and other mortgages - Deal types and ERCs checked August 2026
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