Fixed vs Tracker Mortgages in the UK
When choosing a mortgage in the UK, one of the most important decisions is whether to go with a fixed-rate or a tracker-rate deal. Each has its benefits and drawbacks, and the right option depends on your risk tolerance, financial goals, and the current interest rate climate.
As of mid-2025, the Bank of England base rate sits at 4.5% after a period of gradual reductions from its peak in 2024. This environment makes the fixed vs tracker decision more relevant than ever.
What Is a Fixed-Rate Mortgage?
A fixed-rate mortgage charges the same interest rate for a set period, usually 2, 3, 5, or even 10 years. Your monthly payments stay the same throughout that term, no matter what happens to interest rates in the wider market.
Pros of Fixed-Rate Mortgages:
- Predictable payments make budgeting easier
- Protection from interest rate rises
- Peace of mind for long-term planners
Cons of Fixed-Rate Mortgages:
- Can be more expensive than tracker rates initially
- No benefit if rates fall
- Early repayment charges if you exit the deal early
What Is a Tracker Mortgage?
A tracker mortgage follows the Bank of England base rate, plus a set percentage (for example, base rate + 1%). This means your payments can rise or fall depending on changes to the base rate. Tracker deals are usually available for 2–5 years.
Pros of Tracker Mortgages:
- Lower rates when the base rate falls
- Often cheaper than fixed deals at the outset
- Some have no early repayment charges
Cons of Tracker Mortgages:
- Payments can rise significantly if rates go up
- Budgeting can be harder due to uncertainty
- Less suited to risk-averse borrowers
Real-World Example
Let’s say you borrow £200,000 over 25 years.
- Fixed-rate mortgage: 5-year fixed at 5% interest = £1,169 per month for the fixed term
- Tracker mortgage: Base rate (4.5%) + 1% = 5.5% interest = £1,228 per month initially
If the base rate falls to 4% after one year, your tracker rate would drop to 5%, matching the fixed rate — and if it fell further to 3.5%, your payments could drop to around £1,112 per month. However, if rates rise to 5%, your tracker payments would increase to about £1,285 per month.
Fixed vs Tracker: Key Differences
| Feature | Fixed-Rate | Tracker-Rate |
|---|---|---|
| Interest Rate | Stays the same during deal period | Moves with Bank of England base rate |
| Monthly Payments | Stable and predictable | Can rise or fall at any time |
| Best When | Interest rates are rising | Interest rates are stable or falling |
| Budgeting | Easy to plan long-term | More uncertain |
| Early Repayment Charges | Usually applies | Often lower or none |
Which One Should You Choose?
There is no one-size-fits-all answer. Consider a fixed-rate mortgage if:
- You want stable, predictable payments
- You think interest rates will rise
- You’re on a tight budget
A tracker mortgage may suit you better if:
- You’re comfortable with fluctuating payments
- You expect rates to remain low or fall
- You want to avoid high early repayment fees
What Happens After the Deal Ends?
When your fixed or tracker deal ends, you will usually move onto your lender’s standard variable rate (SVR), which is often higher. You can avoid this by remortgaging or switching to a new deal before your current one ends.
Frequently Asked Questions
Is a tracker mortgage riskier than a fixed mortgage?
Yes. With a tracker, your payments can rise if the Bank of England base rate increases, which could make budgeting difficult. Fixed mortgages remove this risk but may cost more initially.
Can I switch from a tracker to a fixed mortgage?
In many cases, yes — but you may face early repayment charges. It is worth checking the terms of your mortgage before switching.
Which mortgage type is better in 2025?
If you believe the base rate will keep falling, a tracker could save you money. If you want certainty, a fixed rate is safer. A broker can help you find the most suitable deal.
Final Thoughts
Fixed-rate mortgages offer stability, while tracker mortgages offer flexibility and potential savings, but with more risk. The best choice depends on your personal financial situation, your attitude to risk, and your expectations for future interest rates.