Compare Tracker Mortgages

What is a tracker mortgage?

A tracker mortgage is a mortgage with an interest rate, which moves in line with the Bank of England base rate. This means your monthly payments could fall if the base rate falls or rise if the base rate rises.

How do tracker mortgages work?

With a tracker mortgage the interest rate is usually set at a percentage above or below the Bank of England base rate and increases or decreases accordingly for the duration of your deal. For instance, you might find the best tracker mortgage for you is set at base rate plus 2%. If the base rate is at 1%, this means your monthly payments will be calculated using an overall interest rate of 3%. Should the base rate then rise to 1.5%, the interest rate on which your mortgage payments are based will rise to 3.5%.

There are tracker mortgages that will follow the base rate for a specific amount of time, such as two years or five years. Alternatively, a lifetime tracker mortgage will track the base rate for the entire term of your mortgage loan.

How to choose the best tracker mortgage for you

Our mortgage comparison tool is the easiest way to search out tracker mortgage rates and a deal that is suitable for your requirements.

Select the reason you’re looking for a mortgage – perhaps you’re a first-time buyer, remortgaging or moving home – and input the value of your property, the size of the mortgage you need, and the terms you might consider. Straight away all the best tracker mortgages, which are both relevant and available to you, will be there for you to select.

The essential information you’ll want to see such as interest rates, APRC, and arrangement fees will be shown too, as well as indication of your monthly repayment based on the criteria you have supplied and the deals that have been found.

The annual percentage rate of charge, or APRC, highlights how much a mortgage will cost you each year in interest rates but also any additional fees, so you can compare mortgages more easily.

Should I get a tracker mortgage?

A tracker mortgage without an early repayment charge could be an option if you’re thinking of moving home or remortgaging in the near future, particularly as the best tracker mortgage rates are often cheaper than fixed-rate mortgages.

However, longer term, a tracker mortgage is only likely to be suitable if your finances are such that they could comfortably absorb any rise in your monthly payments caused by increases in the base rate. If you’re on a tight budget, taking a risk that interest rates will move in your favour is unlikely to be a good idea.

» MORE: Do you need a fixed-rate or variable mortgage?

Types of tracker mortgage

There are two main types of tracker mortgage:

Lifetime tracker mortgages

A lifetime tracker mortgage will run for your entire mortgage term. Its longevity means you won’t need to pay out mortgage arrangement fees every few years to secure a new deal. However, as it’s almost impossible to know what level interest rates might be in 10 or 20 years’ time, lifetime trackers are often considered to involve greater risk than tracker mortgages with a fixed initial period.

Fixed-term tracker mortgages

Other tracker mortgages only track for a set length of time, rather than the whole mortgage term, before switching to the lender’s standard variable rate (SVR). Typically this initial period will be for either two, four or five years, after which you’ll need to remortgage if you don’t want to sit on the SVR.

» COMPARE: Remortgage deals

What are the benefits of tracker mortgages?

The biggest benefit of a tracker mortgage is if interest rates fall your mortgage rate will fall too, reducing your monthly repayments. Furthermore, some lenders will allow you to make overpayments, up to a certain level, on a tracker mortgage without any charges. This means if your monthly repayments fall you could use the money you’re saving to overpay your mortgage, and clear it faster. Not having an early repayment charge also provides flexibility if you’re thinking of moving or remortgaging in the near future.

Are there any disadvantages to tracker mortgages?

If interest rates rise your mortgage rate will rise too, meaning a mortgage that was affordable can suddenly become expensive. It’s important to factor in potential rate rises when working out whether you can afford a mortgage. You can mitigate this by picking a tracker mortgage with a cap – this is a maximum rate you’ll pay. Also watch out for tracker mortgages with collars – this is a minimum interest rate that you must pay, meaning there could be a time when the base rate falls but your monthly payments don’t.

What are the alternatives to a tracker mortgage?

If you want another form of variable rate mortgage, a discount rate mortgage – which tracks at a certain level below the standard variable rate of a lender for a set period of time – could be worth exploring.

» COMPARE: Discount mortgages

Alternatively, if you would prefer certainty over your mortgage payments, a fixed-rate mortgage is an option.

» COMPARE: Fixed-rate mortgages

Tracker Rate Mortgages FAQ