Fixed or tracker mortgage: which should you choose?

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.

How they compare

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.

Source: MoneyHelper - fixed, tracker and other mortgages — Deal types and ERCs checked August 2026