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What is a tracker mortgage?

A tracker mortgage has a variable interest rate based on a financial indicator. There are lots of indicators that lenders can choose, but the most common is the Bank of England base rate. 

Your payments go up or down each month, depending on what happens to the indicator you follow. Typically, if interest rates fall, you’ll pay less, but when they go up, your repayments can spike.

These rates typically begin cheaper than fixed rates, and they’re popular when it looks like interest rates will fall or stay low. The risk is that if rates suddenly rise sharply, mortgage repayments spike too. 

Typically, the rate is only locked in for a short period, for instance, two or five years, after which point lenders switch you to a much less attractive variable rate deal. 

However, it is possible to get a lifetime tracker mortgage, which tracks an index or indicator for the whole of the mortgage repayment period.

Other types of mortgage interest rates

  • Variable interest rates can increase or decrease at any time because they're set by the lender, which can make budgeting tricky.

  • Fixed interest rates will stay the same for a period of up to 10 years, depending on how long you set them for, but they can be hard to exit.

  • Discount interest rates can change at any time but stay a certain percentage less than the lender's SVR.

How to compare tracker mortgage deals

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Mojo is a free online mortgage broker. We partner with them so you can get all the mortgage support you need in one place.

Mojo will find out about your circumstances, check your eligibility, and search across the whole of market to help you secure the best mortgage for your circumstances.

An expert will be on hand to offer help and advice and you will be supported through each step of your mortgage application.

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How do tracker mortgages work?

Most trackers are set at a certain level above the indicator they follow. Instead of fixed monthly payments, your mortgage interest changes depending on what happens to the indicator. The most common indicator is the Bank of England (BoE) base rate.

For instance, your lender could set your tracker at 1% above the base rate. The base rate is currently 0.75%, meaning your interest rate would be 1.75%. If the BoE increases the base rate to 1%, your mortgage interest will go up to 2%, but if the rate is lowered to 0.5%, your interest payments drop to 1.5%. 

Some trackers have an interest rate “floor” (which is sometimes referred to as a “collar”). A floor is when your interest rate won't go below a certain level, even if the rate it follows does. For example, if your lender sets its interest rate floor at 1.9% and the indicator it is tracking falls to the point that your interest rate would ordinarily fall below this level, the floor would keep your rate at 1.9%. 

It’s important to remember that rates can go up or down, which means that if you’re considering a tracker mortgage, you must factor in whether you can afford for your repayments to increase. 

UK tracker mortgage rates vary depending on how much you want to borrow, how many years you want to spend making repayments and how big your deposit is. 

At the time of writing, most lenders have not yet updated their deals to reflect the latest rate rise, but the best deals currently available tend to track at 0.75% above the BOE base rate. 

Many lenders charge much higher rates. Not everyone is eligible for the best deal, so it's important to shop around, use comparison sites and even consult a broker to get the most affordable deal.

To find the best tracker mortgage, click on the View deals button at the top of this page. It lets you compare tracker rate mortgages, including lifetime trackers.

How does a tracker mortgage work, and what other interest rates can you get?

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How long does a tracker mortgage last?

Fixed-term tracker mortgage rates usually last for two, three or five years. When the set period of your tracker mortgage ends, you'll start paying the lender's standard variable rate (SVR) instead. 

The lender sets the SVR, and it can change at any time. It's usually expensive, so you should look at remortgaging to a new fixed-rate or tracker deal. 

If you want to switch deals before the tracker period ends, you may have to pay an early repayment charge. This is typically a percentage of your remaining mortgage balance, meaning it could be thousands of pounds.  

You can also get lifetime tracker mortgages.

Lifetime tracker mortgages

A lifetime tracker mortgage is when the tracker interest rate lasts until your mortgage is paid off.

These trackers generally don’t offer the best interest rates, but they often come without early repayment charges for overpaying or switching to a better mortgage. 

You may also benefit from not having to pay remortgage fees ever again if you stick with your rate. 

What’s the difference between a variable mortgage and a tracker mortgage?

A tracker mortgage is a kind of variable mortgage, but it has important benefits in terms of security, predictability and cost control:

Tracker mortgage

A tracker mortgage is directly linked to an external rate that your lender must follow when setting interest rates.

A lifetime fixed rate mortgage lets you lock in interest rates for the loan’s entire lifetime (until you have paid it off). These are the ultimate choice for certainty, as you know exactly what your repayments will be, but they’re often very expensive. If you want this sort of security, make sure you have the biggest deposit you can manage to attract the best deals.

Variable mortgage

With a variable mortgage, your lender is free to set its own interest rates, and it can change them whenever it chooses.

A lifetime fixed rate mortgage lets you lock in interest rates for the loan’s entire lifetime (until you have paid it off). These are the ultimate choice for certainty, as you know exactly what your repayments will be, but they’re often very expensive. If you want this sort of security, make sure you have the biggest deposit you can manage to attract the best deals.

Advantages of a tracker mortgage

Some benefits of tracker mortgages include:

  • Low rates compared with other mortgages

  • Lower monthly payments when the base rate is low

  • Making overpayments can be easy with lifetime trackers

  • Lenders can only change rates if the financial indicator changes too

Disadvantages of a tracker mortgage

  • Higher repayments when the base rate goes up

  • Less certainty around repayments makes it hard to plan

  • Early repayment fees for fixed-term tracker mortgages

  • If repayments rise and you can’t afford them it could damage your credit score

  • Interest rate floors or collars can limit how far your rate falls

What can cause my tracker mortgage rate to change?

Most tracker mortgages follow the Bank of England's base rate, so changes to that are what cause your repayments to rise or fall.

The Bank of England base rate is usually voted on by the Monetary Policy Committee eight times a year. It’s changed regularly of late, rising in December 2021, February 2022 and March 2022.

The base rate has been less than 1% for more than 10 years. It hit a record low of 0.1% in March 2020, to combat the economic shock from the COVID-19 pandemic. Since then, it has risen to 0.75%.

Other trackers used to follow something called the Libor rate (London InterBank Offered Rate), which was the rate lenders use to loan money to each other. This has been discontinued and replaced by the Sterling Overnight Index  Average (SONIA). Most lenders that were offering LIBOR-linked mortgages switched their customers to the BoE base rate. 

Make sure you’re looking at a real tracker linked to an external rate, not a variable mortgage where the rate is chosen by the lender themselves.

  • Capped interest rates can be tracker, discount or variable, but they specify a maximum interest rate they definitely won't go above.

Here's how to work out which type of interest rate suits you best.

Nisha Vaidyaquotation mark
A tracker mortgage can be a great way to ensure you're always paying the right amount, no matter the economic climate. However, if you prefer the peace of mind of having consistent monthly payments, a fixed deal may be better for you.
Nisha Vaidya, Mortgage Editor

Tracker mortgage FAQs

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