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A tracker mortgage tracks the Bank of England base rate, so your monthly payments can fall when the base rate falls, but they can also rise when it goes up.
A tracker mortgage is a type of variable rate mortgage where your interest rate follows, or “tracks”, the Bank of England base rate. Your rate is set at a fixed margin above (or occasionally below) the base rate, so the overall rate you pay moves automatically whenever the base rate changes.
Because payments can move in either direction, a tracker tends to suit borrowers who can afford some uncertainty in exchange for the chance of lower payments if rates fall.
Tracker mortgages
Speak to a mortgage advisor who can compare tracker and fixed rate deals from a wide range of lenders based on your circumstances.
A tracker mortgage is a type of variable rate mortgage where your interest rate follows, or “tracks”, an external benchmark, almost always the Bank of England base rate. Unlike a fixed rate mortgage, where you pay the same rate for a set period regardless of what happens to interest rates, a tracker rate moves up and down in line with the base rate.
The rate you pay is usually expressed as the base rate plus a set percentage, known as the margin or “tracking rate”. This margin is fixed for the length of your deal, but the overall rate you pay changes whenever the Bank of England moves the base rate. Most lenders update your payments from the start of the month following a base rate change.
This transparency is one of the main appeals of a tracker mortgage. You always know exactly how your rate relates to the base rate, and any change the Bank of England makes will be reflected in your payments. Tracker deals typically last 2 to 5 years, though some lenders offer lifetime trackers that run for the whole mortgage term.
Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
A tracker mortgage is one of three main types of variable rate mortgage in the UK. The table below shows how they compare.
The key difference is control. With a tracker, rate changes are tied to an independent benchmark you can monitor. With a discounted variable rate or SVR, the lender has discretion over changes, even if the base rate stays the same.
A tracker rate isn't the same as your lender's standard variable rate, even though both can move up and down. A tracker's movements are tied directly to the Bank of England base rate, so you can check the base rate at any time and know exactly where your rate stands.
When you take out a tracker mortgage, your lender sets a margin above (or occasionally below) the Bank of England base rate. This margin stays fixed for the length of your deal, even though the overall rate you pay moves whenever the base rate changes.
The Bank of England's Monetary Policy Committee meets eight times a year to decide on the base rate, announcing its decision at 12pm on the Thursday of each meeting. Most lenders apply any change to your payments from the first day of the following month.
If the base rate rises, your payments rise; if it falls, your payments fall. You'll need to be confident you could afford higher payments if rates move against you, and it's worth planning your finances with that possibility in mind.
Not all tracker mortgages are the same. Understanding the different types helps you choose the right product for your circumstances.
Know your options
Term trackers
The most common type. Follows the base rate for a set period, typically two or five years, then reverts to the lender's standard variable rate unless you remortgage to a new deal.
Lifetime trackers
Also called “whole of term” trackers, these follow the base rate for your entire mortgage term and don't revert to the standard variable rate. They offer maximum flexibility, but mean exposure to base rate changes for the full term.
Capped trackers
Include a cap that limits how high your rate can go, regardless of base rate movements. Capped trackers are less common and typically come with a higher margin, because you're paying for the protection.
Collared trackers
Include a collar, or floor, which sets a minimum rate you'll pay, regardless of how far the base rate falls. Collared trackers were more common during the period of ultra-low interest rates between 2009 and 2022.
Tracker rates and fixed rates tend to move in different ways. A fixed rate deal locks in your interest rate and monthly payments for a set period, giving you certainty and protection from rate rises. A tracker rate moves in line with the Bank of England base rate, so your payments can go up or down as the base rate changes.
Fixed rates typically start lower than tracker rates, because you're paying a premium for the flexibility and the chance to benefit from future cuts with a tracker. If the base rate falls during your deal, tracker payments fall with it, while fixed payments stay the same. If the base rate stays flat or rises, a fixed rate deal usually works out cheaper overall.
Deciding between the two comes down to how confident you are that rates will fall, and how comfortable you are with your payments changing. Speak to an advisor for current rate information and a comparison based on your circumstances.
Like any mortgage product, a tracker comes with both advantages and disadvantages. Understanding these helps you weigh up whether the potential savings are worth the added uncertainty.
Benefits
Set against these benefits, a tracker carries some real risks:
Before choosing a tracker, it's worth thinking honestly about how you'd cope if your payments increased, not just whether you'd benefit if they fell.
A tracker mortgage isn't right for everyone. Based on our experience helping homeowners choose between tracker and fixed rates, here's who tends to benefit from tracking.
Consider two homeowners remortgaging the same amount over the same term. One chooses a fixed rate for certainty and knows exactly what they'll pay every month. The other chooses a tracker, paying a little more to start with, hoping that base rate cuts bring their payments down over the course of the deal. If rates fall as expected, the tracker borrower could end up paying about the same as, or less than, the person who fixed. If rates stay flat or rise, the person who fixed comes out ahead. Neither outcome is guaranteed, which is why it's worth speaking to an advisor about your own risk tolerance before deciding.
Don't just think about whether you could afford higher payments on paper. Think about how you'd feel if your payment changed every month for the next two to five years. Some people manage that uncertainty well; others find it genuinely stressful, even when they can afford it.
Choosing between a tracker and a fixed rate is one of the most common questions we hear. Here's a framework to help you think it through.
Most tracker and fixed rate deals let you overpay up to a set proportion of your outstanding balance each year without triggering a charge, so check this feature on any deal you're considering, whichever way you lean. If you're unsure, speak to a mortgage advisor who can run the numbers for your specific situation and explain what would need to happen for each option to work out better.
Some tracker mortgages include features that limit how high or low your rate can go. Understanding these terms helps you evaluate different products.
A cap sets a maximum rate you'll ever pay on your tracker, regardless of how high the base rate rises. Caps provide downside protection but are relatively rare and usually come with a higher margin, since you're paying for the certainty that your rate can't exceed a set level.
A collar, sometimes called a floor, sets a minimum rate you'll pay, even if the base rate falls a long way. If your tracker has a collar, you won't benefit fully from further rate cuts once your rate reaches the floor.
Collars were more common during the years of ultra-low interest rates between 2009 and 2022, when some borrowers had trackers that could theoretically have fallen very low without one. If you have an older tracker mortgage, it's worth checking whether it includes a collar that might be limiting your benefit from current rate movements.
If you're comparing tracker deals, check the terms carefully. A tracker with a lower margin but a collar could cost more over time than one with a higher margin and no floor. Most current tracker mortgages don't include caps or collars, but it's always worth checking the product terms before committing.
Caps and collars aren't always disclosed prominently. Ask your advisor or lender directly whether a deal includes either feature, and get it confirmed in writing before you commit.
If you have a term tracker, which is the most common type, your deal will end after the agreed period, typically two or five years. Understanding what happens next helps you plan ahead.
When your tracker deal ends, your mortgage automatically moves to your lender's standard variable rate (SVR). The SVR is almost always significantly higher than both tracker and fixed rates, so moving onto it can mean a noticeable jump in your monthly payment. This is why remortgaging before your deal ends matters. Most advisors recommend starting the process four to six months before your tracker expires to allow time to arrange a new deal.
If you have a lifetime tracker, you won't face this decision, since your tracker rate continues for the whole mortgage term. It's still worth reviewing periodically whether a different product would suit you better, especially if your circumstances change.
The application process for a tracker mortgage is similar to any other mortgage application. Here's what to expect.
How it works
Assess your situation
Work out how much you need to borrow, your loan-to-value, whether you could afford potential payment increases, and how long you plan to stay in the property.
Get expert advice
A mortgage advisor can compare tracker deals from a wide range of lenders, run through how payments might change under different rate scenarios, and explain the terms of caps, collars, and early repayment charges.
Decision in principle
Before a full application, most lenders offer a decision in principle, confirming provisionally how much you could borrow. This typically uses a soft credit check that doesn't affect your credit score.
Full application
You'll need to provide proof of identity, proof of address, proof of income, recent bank statements, and details of any existing debts and financial commitments.
Valuation and underwriting
The lender values the property and assesses your application against its criteria. This typically takes a few weeks, depending on the lender and the complexity of your circumstances.
Mortgage offer
If approved, you'll receive a formal offer setting out the tracking margin, any caps or collars, early repayment charge terms, and the rate you'd revert to if you don't remortgage when the deal ends.
Beyond the interest rate, several costs apply to tracker mortgages. Understanding the total cost helps you compare deals accurately rather than focusing on the headline rate alone.
Most tracker deals come with an arrangement or product fee, and some lenders charge no fee at all. A deal with a lower rate but a higher fee can sometimes cost more overall than one with a slightly higher rate but no fee, especially for a smaller mortgage or a shorter deal. Always compare the total cost over the deal period, not just the fee or the rate in isolation.
Lenders need to value the property before approving your mortgage. Many lenders offer free valuations, though some charge a fee depending on the property value.
If you're remortgaging to a new lender, you'll need a solicitor to handle the legal transfer. Many lenders offer free legal work to attract remortgage customers, which can reduce this cost significantly.
Many tracker mortgages have no early repayment charges, but some do. If your tracker includes one, you could pay a percentage of your outstanding balance if you repay early, switch deals, or move home during the deal period. Always check the early repayment charge terms before committing to a deal.
A tracker mortgage can work differently depending on your circumstances. Here's how it applies to some common situations.
Tracker mortgages are available to first-time buyers, though lenders tend to be cautious about offering variable rates to those new to homeownership. If you're a first-time buyer considering a tracker, think about whether your budget already feels stretched, and whether the certainty of a fixed rate would help you adjust to the costs of homeownership before adding payment variation into the mix.
Tracker mortgages are popular with people remortgaging who want flexibility. If your current deal is ending, compare tracker and fixed rates for your loan-to-value, consider whether you might want to switch again if rates move, and check whether a tracker with no early repayment charge gives you the flexibility you value. Start the process four to six months before your current deal ends.
Tracker mortgages can appeal to landlords who want lower costs if rates fall, flexibility to sell a property without an early repayment charge, and the ability to make overpayments from rental income. Buy-to-let tracker rates are typically higher than residential rates, so it's worth weighing up whether the flexibility justifies the extra cost.
Tracker mortgages are available to self-employed borrowers, subject to standard income verification. You'll typically need two to three years of accounts or tax calculations, evidence of ongoing business income, and a strong affordability assessment. The flexibility of a tracker with no early repayment charge can suit self-employed borrowers whose income varies and who want the option to adjust their mortgage arrangements later.
Understanding what influences tracker rates helps you anticipate future changes and make informed decisions.
The base rate is the primary driver of tracker mortgage rates. The Bank's Monetary Policy Committee sets the rate based on a number of factors:
Predictions about future rate movements are not guarantees. Economists' forecasts can and do change as new data emerges, so it's worth treating any prediction, including ones in this guide, as a general steer rather than a certainty.
The margin a lender adds to the base rate reflects several things: their cost of funding, how much competition they face, their assessment of your risk as a borrower, including your loan-to-value, and product features such as caps or the absence of early repayment charges.
A tracker mortgage can offer real benefits, but it's important to go in with a clear understanding of the risks.
If you're ever worried about keeping up with your mortgage payments, free and impartial guidance is available from MoneyHelper at moneyhelper.org.uk or by calling 0800 138 7777.
Common questions
A tracker mortgage is a variable rate mortgage where your interest rate follows the Bank of England base rate. Your rate is typically set at the base rate plus a fixed margin, so when the base rate changes, your mortgage rate and monthly payments change accordingly.
Monthly payments depend on your mortgage size, term, deposit, and the current tracker rate, which moves with the Bank of England base rate. Because rates change frequently, the best way to get an accurate figure for your situation is to speak to a mortgage advisor or use a mortgage calculator.
A tracker may suit you if you believe interest rates are likely to keep falling and you can afford potential payment increases if that doesn't happen. Fixed rates often offer lower starting rates, so it comes down to whether future base rate cuts would bring your total tracker costs below what you'd pay on a fixed deal. Speak to an advisor to weigh up the current market.
When a term tracker ends, your mortgage reverts to the lender's standard variable rate, which is typically much higher than tracker and fixed rates. It's worth remortgaging to a new deal, either with your current lender or a different one, before this happens to avoid the higher rate.
Yes. Many tracker mortgages let you switch to a fixed rate without paying an early repayment charge, giving you the flexibility to fix if rates start rising. Check your specific product terms, as this varies by lender.
It varies by product. Many tracker mortgages have no early repayment charges, which is one reason they appeal to borrowers who want flexibility. Others do include charges, so it's worth checking the product terms before committing.
A collar, or floor, is a minimum rate you'll pay, regardless of how low the base rate falls. If you're considering a tracker, check whether it includes a collar, since this could limit how much you benefit if rates fall further.
Yes, tracker mortgages are available to first-time buyers. It's worth thinking about whether the uncertainty of variable payments suits your situation, especially as budgets are often tight when buying a first home.
A tracker follows the Bank of England base rate, while a discounted variable rate follows the lender's standard variable rate at a discount. With a tracker, rate changes are tied to an external benchmark you can monitor. With a discounted rate, the lender can change its standard variable rate at its own discretion, even if the base rate stays the same.
Tracker deals typically last two or five years before reverting to the lender's standard variable rate. Lifetime trackers follow the base rate for your entire mortgage term without reverting.
Starting tracker rates are typically higher than the best fixed rates available at the same time, because you're paying for the flexibility and the potential to benefit if the base rate falls. If the base rate does fall during your deal, your tracker payments will reduce while fixed payments stay the same.
The Bank of England base rate is the primary driver. The margin a lender adds on top depends on their cost of funding, the level of competition, your loan-to-value, your risk profile, and product features such as caps or the absence of early repayment charges.
It depends on your circumstances, risk tolerance, and view on where interest rates are heading. Fixed rates offer certainty, while trackers offer flexibility and the potential for savings if rates fall. Think about how you'd feel if your payments increased, and whether you value knowing exactly what you'll pay each month more than the chance of a lower cost overall.
Most tracker mortgages allow overpayments, and many allow substantial overpayments each year without a charge. Check your specific product terms, as some deals have overpayment limits or charges.
A lifetime tracker follows the base rate for your entire mortgage term, rather than just an initial period. You won't move onto the standard variable rate when a typical deal would end, because the tracking continues for the whole term. This offers maximum flexibility, but means exposure to base rate changes for the full length of your mortgage.
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