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Which is best? fixed-rate or tracker mortgage?

In this article, we compare fixed-rate and tracker mortgages to determine which offers more advantages.

5 min read

Are you unsure of which mortgage type is the best fit for your unique situation? In this article, we compare fixed-rate and tracker mortgages to determine which offers more advantages. We'll evaluate their respective pros and cons as well as other key factors you should take into account when deciding between these two different types of mortgages.

What is a fixed-rate mortgage?

A fixed-rate mortgage can be a great way to guarantee that you'll have the same monthly repayment for the entire duration of your deal. This makes budgeting more predictable, especially if you have limited financial flexibility. By having a set payment each month, it's much easier and stress-free to plan ahead financially without worrying about payments increasing or decreasing unexpectedly.

To learn more about this type of mortgage, be sure to read our informative article, "Our guide to Fixed Rate Mortgages"

What is a tracker mortgage?

With a tracker mortgage, the interest rate you are charged on your loan follows the Bank of England's base rate. Meaning that each time it changes, so will how much money you owe in total and what monthly payments look like. On top of that set percentage imposed by your lender is added to this BoE base rate - producing an overall interest figure for your borrowed funds.

To ensure stability in the amount of interest you're paying, mortgage lenders may include a cap or collar. A cap will limit your tracker mortgage interest rate so that it cannot increase beyond a certain percentage. Conversely, with a collar in place, your rate will never drop below the specified collared level.

The Pros and Cons of Fixed-rate and Tracker Mortgages

    Pros   Cons

Fixed Rate Mortgages


  • If the base rate increases, your mortgage payment will remain unchanged.

  • Compared to a lender's Standard Variable Rate (SVR), many fixed rates offer more appealing options for customers.

  • With a fixed monthly mortgage payment that remains the same throughout your loan period, budgeting is much easier and more predictable.




  • Although a decrease in the base rate may not reduce your interest rate, you will still be unable to enjoy any potential financial gains from an overall reduced mortgage payment.

  • If you choose to switch mortgage deals before your current deal ends, be aware that you may incur an Early Repayment Charge (ERC).

Tracker Mortgages


  • By lowering the base rate, the Bank of England will give you a financial break and your mortgage payment could decrease.

  • Tracker rates are often lower than a lender's standard variable rate (SVR), making them an attractive option for borrowers.

  • Fixed rates may not be the most affordable choice - in some cases, tracker rate options could offer a better deal.


  • If the Bank of England increases its base rate, your mortgage payment will subsequently increase.

  • If your tracker mortgage rate incorporates a collar, you may not experience any substantial reductions in the base rate.

  • If you opt to switch your mortgage deal prior to the end of its term, it is likely that you will incur an Early Repayment Charge (ERC). If you opt to switch your mortgage deal prior to the end of its term, it is likely that you will incur an Early Repayment Charge (ERC). 


Which should I choose? fixed-rate or a tracker?

Before making any decisions, it's important to consider several key factors. The most pertinent is your ability to pay a higher monthly mortgage bill should the Bank of England base rate rise suddenly. That will help you set realistic preferences and limitations for yourself as you move forward in this process.

Fixed-rate Mortgage.

If you want to be confident that your mortgage payments will remain stable every month, then a fixed-rate mortgage is the right choice for you. With this type of loan, there are no unexpected increases in cost and rates remain consistent even if interest rates go up. Fixed rate mortgages provide financial certainty so that affordability worries or fears about rising costs can be put aside.

Tracker Mortgage

When determining if a tracker mortgage is best for you, consider the advantages and disadvantages of an interest rate and payment that could change. A tracker mortgage might be beneficial when there's room in your budget to accommodate fluctuations in payments, and you would like access to potentially lower base rates which may reduce the amount of interest charged.

Before making a decision, it's essential to examine how rates may fluctuate. Our article, "When can we expect interest rates to either increase or decrease? Here are the current projections of 2023" will help guide you through the process and provide invaluable insight into this conundrum. With our assistance, you'll be able to decide if a tracker mortgage is truly right for your needs!

We can help you make the right decision!

When choosing between a tracker and fixed-rate mortgage, the affordability of your finances, future goals and the current state of the housing market are all factors to consider. To make an informed decision for yourself it is important to consult with a trusted mortgage expert who will assess your current financial situation as well as any concerns you have. This way they can help guide you towards finding a loan that best meets both your budget and needs.

When searching for the best mortgage deals, your broker will take into account your financial circumstances and provide an honest assessment of what you can afford in terms of loan payments. Having realistic expectations ensures that they are able to offer you competitive mortgage rates suited to your needs.

Take the first step towards realising your dream of homeownership! Get in touch with Hello Mortgage today for absolutely free initial advice and guidance. We'll be there to help you through every step - book a call now!

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