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Tracker mortgages

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What's a tracker mortgage?

They’re a type of variable rate mortgage usually set at a certain percentage above the Bank of England (BoE) base rate. Although buy-to-let and commercial trackers may follow a different financial indicator, such as SONIA (sterling overnight index average).

As with all variable mortgages, the interest rate can rise or fall during your deal period. Trackers are often cheaper during the initial period of a fixed-rate mortgage.

That said, it’s easier to predict tracker rate changes than changes in other variable rate mortgages, as they only change when the base rate - or other financial indicator - does, rather than at the lender’s discretion.

How are tracker mortgages different from other mortgages?

Tracker mortgage vs fixed-rate mortgages:

Tracker mortgages are mainly different to fixed-rate mortgages because the interest rate can change during the deal term.

With a fixed-rate mortgage you’re paying for the security that the interest rate won't change during the deal period. This is a safer option for those on a strict budget, even though fixed rates are usually set higher than tracker rates.

Tracker mortgage vs standard variable rate (SVR):

Tracker mortgages also differ from other types of variable rate mortgages, such as a standard variable rate (SVR), as they follow an external indicator like the base rate. This means lender’s don’t have full control over changes.

On the other hand, each lender has an SVR, which is set purely at their discretion. Although they may be influenced by base rate changes and other external financial factors.

Tracker mortgage vs discount rate mortgages:

A discount rate mortgage works similarly to a tracker, but instead of following an external indicator, it follows the lender’s SVR and provides an initial discount off the lender's SVR for a set period of time.

Tracker mortgages with Mojo

We have partnered with an expert broker to help borrowers save on their biggest monthly expense.

Just answer some questions about your situation and let Mojo's expert advisors guide you to a mortgage tailored to your needs. And the best part of it all is, it’s completely free (yes, really!).

With access to lenders across the whole of the market, Mojo advisors strive to save you money and find your best tracker mortgage rate.

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How do tracker mortgages work?

Tracker mortgages are set at a percentage - decided by the lender - above the BoE base rate. This means, when the base rate changes, your repayments therefore go up or down in line with those changes.

For example:

  • Base rate 5.25%* - your lender sets the rate at 2% above the base rate - you pay 7.25%
  • Base rate changes to 5.5% - you now pay 7.5%
  • Base rate changes to 3% - you now pay 5%

*For demonstration purposes only but correct at the time of writing

Like all mortgages, the interest rate you’re offered for your tracker mortgage depends on the size of your deposit and your personal circumstances.

How often do tracker mortgage rates change?

The BoE Monetary Policy Committee (MPC) meets 8 times per year to set the base rate, but can have additional meetings if they feel it's necessary.

This means that your interest rates - and therefore repayments - could change 8 times per year or more. Staying up to date with UK financial news can help you to plan ahead - usually the base rate increases when inflation is high.

Here's a history of the recent base rate changes in the past year:

Date changed Rate
03 Aug 23
22 Jun 23
11 May 23
02 Feb 23

What does an interest-rate collar and cap mean?

Interest-rate collar:

Also known as an interest rate floor, it's the rate in which the interest on your mortgage can't fall below - even if the base rate does.

For example, if your lender has set a collar rate at 1.5% and the base rate falls to 1%, the interest you pay on your mortgage will still be 1.5%.

Not all tracker mortgages have a collar rate, so check with your lender first.

Interest-rate cap:

Also known as a ceiling, a cap is rare to find on a tracker, but can be invaluable. It’s the exact opposite of a floor (or collar). Your interest rate can never rise above the cap, even if the financial indicator does.

So, if you have a deal set at 2% above the base rate, but capped at 5%, even if the base rate rose above 5%, you wouldn’t pay more than that.

What happens if I want to end a tracker mortgage early?

If you’re within a set deal period, most lenders charge early repayment charges (ERCs) to leave before the end date. Although this doesn’t usually apply to lifetime trackers.

How much ERCs you'll be charged depend on how long is left on your deal. Expect to pay a lot more if you have 9 years left on a deal than if you only have 1.

Either way, it can cost thousands to leave a deal early, and sometimes this outweighs the benefits of remortgaging to a cheaper rate.

A mortgage broker, like Mojo Mortgages, can help you understand your options and which one is best for your needs.

What are the pros and cons of a tracker mortgage?


Advantages of tracker mortgages:

  • They often have cheaper interest rates at the beginning of the deal compared to fixed rate deals
  • There's more certainty than other variable rates due to the rate following an external indicator
  • If the financial indicator falls, you’ll benefit from lower repayments
  • Some lenders may allow unlimited overpayments - especially if it’s a lifetime deal
  • Some lenders might allow you to switch to a fixed-rate mortgage for free if the base rate rises a lot
  • If you can find a deal with a cap, you’ll benefit from knowing your interest won’t rise beyond a certain level

Disadvantages of tracker mortgages:

  • The rate could change several times a year, meaning your repayments could change dramatically and become unaffordable
  • You have to be prepared in case your rate increases, so they're harder to budget for than fixed-rate deals
  • You may have to pay ERCs to leave a deal before it ends
  • If the deal has a floor, your interest rate can't fall below a certain level, so you may not benefit when the base rate falls below a certain level

What our expert says

"As most tracker mortgage rates are linked to the Bank of England base rate, it can be easier to predict whether they are likely to rise or fall compared to other variable deals, which are set at the lender's discretion. This is because there is usually lots of coverage on potential base rate changes in advance, so you may be able to prepare for increases. Of course, you can never be completely sure on what the Bank of England may change the base rate to, so it's always worth being sure you can afford payments if it was to suddenly increase."

Claire Flynn, Senior Content Editor at Mojo
Senior Content Editor | Mojo, Mortgages Expert | Confused.com Mojo logo

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Learn about different mortgage types

Tips & guides on tracker mortgages

See all mortgage guides

Need more help?

How long do tracker mortgages last?

You can typically take a tracker mortgage deal to suit your needs. 2, 3 or 5 years are the most common term lengths, but it’s possible to get 10 year terms and even lifetime tracker mortgages.

Once your deal ends, you’ll fall onto the lender’s default interest rate, the SVR. This is usually higher than fixed-rate and other variable rate deals, so you may want to look at remortgaging to avoid the SVR.

Is a tracker mortgage right for me?

Mortgage experts at Mojo Mortgages can help you answer this question, but ultimately it depends on what you want from your mortgage.

A tracker mortgage may be a good option for those with a more flexible budget. Borrowers who could still afford repayments if interest rates rise, but want to benefit from low initial rates or if rates fall.

If you’re considering a variable rate mortgage, a tracker tends to provide the most certainty of the 3, as it’s easier to predict rate changes.

If you like complete certainty and want to know what your repayments will be every month, a fixed-rate mortgage may suit you better.

Are you tied into a tracker mortgage?

Most tracker deals have a set length, meaning there are likely to be early repayment charges if you leave before the deal term ends.

Some lenders may let you switch to one of their fixed-rate products without paying fees if your tracker rate suddenly increased by a lot. This is not common though, most people will end up paying ERCs.

Can I get a joint tracker mortgage?

Yes, so long as all applicants meet the criteria, you can take out a tracker mortgage with as many applicants as the lender allows. Most joint mortgages are capped at 2 applicants but some allow up to 4.

Can I move my tracker mortgage if I move house?

Some trackers are portable - meaning you can take them with you when you move. This is laid out in your terms and conditions, so if it’s important to you, be sure to ask before you commit.

Keep in mind that porting your mortgage to a new property is not always the cheapest option and you may get a more competitive mortgage from another lender - especially if you’re looking to increase your borrowing.

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Page last reviewed: 25 March 2024

Reviewed by: Claire Flynn


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