Tracker Rate Mortgages

If you are comparing mortgages, you may find tracker rates offered as an alternative to fixed-rate deals. A tracker mortgage moves in line with interest rate changes, which can make it attractive in certain market conditions. Here, we explain what a tracker mortgage is, how it works, the advantages and disadvantages, and where to look for the best tracker mortgage rates.

What is a tracker mortgage?

It is a type of home loan where the interest rate follows, or “tracks”, an external benchmark. In the UK, this is usually the Bank of England base rate.

Because of this variable structure, your monthly payments can rise or fall in line with changes to the underlying interest rate.

How does a tracker mortgage work?

Tracker mortgages follow the base rate for either a fixed period or the full mortgage term, with the lender applying a set margin above the base rate.

If the base rate rises, your mortgage payments will usually increase. If it falls, your payments should normally go down. This means tracker mortgage rates can be less predictable than fixed-rate deals.

Some tracker mortgages may also include features such as:

Collars – A minimum interest rate below which your mortgage rate cannot fall.

Caps – A maximum interest rate limit, although this is less common.

No early repayment charges – Some products do not apply early repayment charges if you repay the mortgage early.

Best mortgage rate tracker options

Tracker mortgages are offered in a variety of structures, depending on how long you want the rate to track the base rate:

Introductory tracker deals – These are usually available over 2-year, 3-year, or 5-year terms, after which the mortgage normally moves onto the lender’s standard variable rate (SVR).

Lifetime tracker mortgages – These mortgages track the base rate for the full term of the loan rather than for a limited introductory period.

Offset tracker mortgages – These allow you to link your mortgage to a savings account, which can help reduce the amount of interest you pay.

It is important to remember that the further ahead you plan, the more uncertainty there may be around future market conditions. The most suitable option will depend on how much flexibility you want and your expectations for future interest rate changes.

Compare tracker mortgage rates online

Tracker mortgage rates can change regularly in line with market conditions and lender appetite, so it is always sensible to review the latest information when comparing live tracker mortgage rates.

Using our free tool below, you can view some of the best tracker mortgage deals currently available from lenders across the UK. To compare today’s tracker mortgage rates, simply enter a few basic purchase details, such as your property value and mortgage amount.

Pros and cons of a tracker mortgage

Tracker mortgages can provide flexibility and the potential for savings, but they also have drawbacks to consider.

Pros

• You could benefit from a lower tracker rate if interest rates fall
• Initial rates are often lower than those offered on fixed-rate mortgages
• Some tracker deals come with low early repayment charges or none at all
• They can offer greater flexibility to overpay, remortgage, or switch deals
• There is clear transparency around how the rate is calculated

Cons

• Monthly payments can rise if interest rates increase
• They offer less certainty than fixed-rate mortgages
• Variable mortgage repayments can make budgeting more difficult
• The overall long-term cost can be harder to predict
• Comparing and finding the best tracker mortgage rates can be more challenging

Best tracker mortgage rates from lenders

Several mainstream and niche UK lenders offer tracker mortgage products, although the availability and competitiveness of deals can vary depending on current market conditions.

Here are a few examples of popular lenders that may offer tracker mortgage rates:

However, not all lenders actively promote tracker mortgages at all times; the product line-up can change frequently, and some of the best deals may only be accessible through a broker.

Fixed vs tracker mortgage rates

The main difference between fixed-rate and tracker mortgages is how they respond to changes in the underlying interest rate.

With a fixed-rate mortgage, your interest rate stays the same for an agreed period, regardless of any changes to the base rate. This gives you certainty over your monthly payments.

With a tracker mortgage, your rate moves in line with the base rate, so your monthly payments can rise or fall over time. This can work in your favour if rates fall, but against you if they increase.

Tracker mortgage rates are often lower than fixed rates at the start, particularly when interest rates are high or expected to fall.

However, fixed-rate deals offer more stability, which may be more suitable if you want predictable monthly costs or expect interest rates to rise.

Buy-to-let tracker mortgages

Tracker mortgages are also available for buy-to-let (BTL) properties. A buy-to-let tracker mortgage works in much the same way, with the interest rate moving in line with the base rate. When assessing an application, buy-to-let lenders will usually consider:

• The anticipated rental income from the property
• The loan-to-value (LTV) ratio and the size of your deposit
• Your experience as a landlord
• The type of property, as non-standard construction can be more difficult to place
• Your credit file, although BTL tracker mortgages may still be available if you have bad credit

Buy-to-let tracker mortgage rates can be slightly higher than those offered on equivalent residential mortgages, and there may be fewer lenders offering them compared with fixed-rate BTL deals.

Frequently Asked Questions