Tracker mortgages
Find out if a tracker mortgage is right for you and get connected to an advisor.
You might pay less if rates go down
Follows the Bank of England’s rate
Flexible if you need to switch or overpay
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What is a tracker mortgage?
A tracker mortgage is a type of variable rate mortgage that "tracks" (or follows) the Bank of England's base rate of interest and adjusts yours to match. This means the amount of interest you pay each month could go up or down if the Bank of England's rate changes.
In general, tracker mortgages aren't set to match the Bank of England's rate exactly -- they're set just above it. Whatever the base rate in a given month, your interest rate will be the same plus a small percentage on top, usually less than 1%.
Types of tracker mortgage
Before you compare deals, here are a few types of tracker mortgage to explore:
Two-year tracker mortgage
Perhaps the most common type of tracker mortgage is the two-year option. This gives you the benefits of a tracked rate with the flexibility to switch deals if your circumstances change or rates begin to rise. After two years, this mortgage will switch to your lender's standard variable rate (SVR).
Get your quoteFive-year tracker mortgage
Lenders will sometimes offer a five-year tracker deal, but they're less common and sometimes only offered to the lender's existing customers. This is because they lock both you and the lender in for longer, which is higher risk for both parties if the market changes.
Get your quoteCapped tracker mortgage
A capped tracker mortgage follows the base rate but will never be higher than a certain level set by the lender. Caps can be helpful in times of rising rates when you want to prevent your monthly payments from getting out of control.
Get your quoteCollared tracker mortgage
A "collar" on your tracker deal means the rate will never fall below a set level, even if the base rate continues to fall. Sometimes a collar is included in your mortgage's small print, so be sure to review it carefully.
Get your quoteTracker mortgage for first time buyers
Tracker mortgages are a popular choice for first time buyers who don't want to be tied to a lender's standard rate or a fixed rate mortgage. They're especially helpful for new homeowners who expect interest rates to stay low or go down in the near future.
Get your quoteTracker mortgage with poor credit score
It's possible to get a tracker mortgage with a less than perfect credit history, but it may mean the lender adds a higher percentage on top on the base rate. Poor credit also means a larger deposit may be required to increase your chances of securing the mortgage.
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Tracker Mortgages vs Standard Variable Rate (SVR)
The key difference between a tracker rate and a mortgage provider's SVR is who sets the rate:
Tracker Mortgages
Tracker mortgages work by attaching their rate to an external marker. Unlike a standard rate deal, trackers remain tied to Bank of England rate, which some borrowers see as fairer and more objective.
Standard Variable Rate Mortgages
An SVR mortgage still uses the Bank of England base rate but usually adds a few percentage points on top. Mortgage providers are also free to change their SVR whenever they choose. They often change their lowest rate frequently to stay competitive.
Tracker Mortgage Pros and Cons
Advantages of a tracker mortgage
- Good value: As well as letting you benefit from lower rates, lenders usually offer cheaper introductory rates on tracker deals than on fixed rate mortgages.
- Rate decreases: If the base rate falls, you’ll benefit from further decreases in your monthly payments. That said, you should check where your collar rate is set.
- Capped increases: Some tracker deals come with a cap, which means your monthly payments won’t go over a certain level even if Bank of England base rate rises.
- Flexible options: Depending on the terms of your mortgage, you may be able to overpay or switch deals, allowing you to adapt to the market or changes in your circumstances.
Disadvantages of a tracker mortgage
- Collar rates: If there's a collar on your tracker rate, that means your monthly mortgage payment can't go below a certain amount and you won't benefit if interest rates continue to fall.
- Rate increases: The same flexibility that gives you room to breathe with a tracker deal can also give you sleepless nights during base rate rises.
- Potential fees: Making overpayments or repaying before your tracked rate ends could trigger your lender's early repayment charge (ERC).
- Property risk: As with any mortgage or secured loan, your home may be repossessed if you don't keep up your monthly payments.
Is a tracker mortgage right for me?
If you're not keen on interest rates being set by your mortgage lender and prefer to follow an external rate, you might find that a tracker mortgage is right for you. To balance the risk of rate rises, tracker mortgages are often lower cost than SVR or fixed rate mortgage deals. They can also be a good option if interest rates are low or falling.
On the other hand, if you're not sure you could afford the higher monthly payments that come with interest rate rises, a fixed rate mortgage could offer more certainty.
Applying for a tracker mortgage
1. Prepare Yourself
Review your income and outgoings to make sure you're in a position to take out a mortgage. Once you've settled on a property you'd like to buy, deduct the deposit you can afford from the asking price to work out the amount you'll need to borrow.
2. Check Your Score
Check your credit history and address any errors or missing information. Lenders will use your credit history to assess your financial standing, so it's important to work on boosting your credit in advance. Rejected applications can leave a mark on your credit file, which in turn leads to further rejections.
3. Compare Deals
Explore the deals lenders offer online. Pay special attention to the terms, eligibility requirements and APRC (Annual Percentage Rate of Charge) for a full picture of the rate you'll be expected to pay.
4. Review Offers
Mortgage providers will request your details and begin sending you their offers in the form of a quote. You should review each offer carefully and assess its terms and rates against your needs and circumstances.
5. Make an Application
If you decide to proceed with a mortgage application, the lender will perform a full credit check. They'll also want to review documents like your ID, proof of address, and pay slips or tax returns. They may also request an advice call to check your affordability.
6. Check the Agreement
Review the fees and charges on your agreement carefully and make sure you can afford the monthly repayments before you sign. Be aware of any introductory period, early repayment charge and penalties for missed payments. Remember that you risk losing your home if you fall behind on your payments.
Our expert says:
‘’If you're lucky enough to be house-hunting when interest rates are falling, a tracker mortgage could be the way to keep your monthly mortgage repayments low. Keep an eye on interest rate announcements and forecasts, and if you need to switch, be sure that early repayment charges don't undo the savings you made.”
Frequently Asked Questions
How long can I get a tracker mortgage for?
Tracker mortgages are typically offered for two and five-year terms. Some lenders offer three and seven-year terms. Occasionally you'll see a ten-year tracker mortgage or even a lifetime tracker mortgage, but these are quite rare.
Can I move home with a tracker mortgage?
If you want to move home before your tracker deal has ended, your mortgage provider might let you "port" (or move) your mortgage to your new property. This can be helpful if your deal is good and your monthly repayments are within budget. On the other hand, you could consider switching to a new variable rate mortgage with better terms.
Can I overpay on my tracker mortgage?
You can usually make overpayments on your tracker mortgage to pay it off sooner. Some lenders will allow unlimited overpayments, but there's sometimes a limit on how much you can overpay before your lender's early repayment charge (ERC) kicks in. Check the terms of the mortgage to make sure.
How often do interest rates change?
The Bank of England can change their base rate of interest up to eight times a year. They hold meetings and vote to decide whether the rate should top up or down or remain the same. Sometimes there's no change for a period of months or even years.
Why do mortgage rates change?
The Bank of England changes its base rate to try and control inflation, so that prices don't rise or fall too quickly. As a central bank, their decisions have an impact on your lender's rates and your monthly mortgage payments. Sometimes, an announcement from the Bank of England can have an impact even when there's no actual change.
How do I know if mortgage rates will fall?
Some lenders lower their mortgage rates immediately following a reduction in the Bank of England base rate. Others follow shortly after. Further reductions in the base rate depend on multiple factors, such as inflation, wage growth and unemployment.
In general, no one really knows what will happen to interest rates and forecasts can often be more of an "educated guess".
Do interest rates go up every year?
Looking at recent changes in the base rate, you could draw that conclusion, but it depends on the market and other factors. The Bank of England's base rate was at a 16-year high in 2023 but stayed put after that, dropping for the first time in four years in August 2024 to 5%.
There were other significant interest rate drops in 2008, 2009 and 2020.
Do tracker rates always follow the Bank of England base rate?
Usually, yes. Some lenders used the London InterBank Offered Rate (LIBOR) to set certain mortgage prices, but this was found to be unreliable and phased out in 2023. Its replacement, the Sterling Overnight Index Average (SONIA) is mainly used to price fixed-rate mortgages and is also run by the Bank of England.
Mortgage providers will sometimes call a mortgage a "tracker" when in fact it tracks a rate they control, so be sure to check the small print.
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External links
If you are looking for further tracker mortgage information, seek advice from one of these links:
