Fixed-Rate Mortgage
A mortgage where the interest rate stays fixed for an agreed period.
Read term →What is Tracker Mortgage?
A tracker mortgage is a variable-rate mortgage where the interest rate usually follows another rate, plus a set margin.
Search other calculators & tools
Definition
A tracker mortgage is a variable-rate mortgage where the interest rate usually follows a reference rate, such as Bank Rate, plus a fixed margin set by the lender.
Tracker mortgage in plain English
With a tracker mortgage, your mortgage rate moves when the rate it tracks moves. The lender usually adds a margin on top of the tracked rate.
For example, a tracker could be described as “Bank Rate + 0.75%”. If the tracked rate changes, your mortgage rate and monthly payment can change too.
How a tracker mortgage works
A tracker mortgage rate is normally made from two parts: the tracked reference rate and the lender’s margin.
Tracker mortgage rate =
tracked reference rate + lender margin
Example:
tracked rate 4.00%
margin 0.75%
tracker mortgage rate = 4.75%
If the tracked reference rate rises, the tracker mortgage rate usually rises. If the tracked reference rate falls, the tracker mortgage rate usually falls.
Key point: a tracker mortgage can become cheaper if rates fall, but it can also become more expensive if rates rise.
Tracker mortgage example
Suppose your tracker mortgage is set at the tracked rate plus 0.75%. If the tracked rate is 4.00%, your mortgage rate is 4.75%. If the tracked rate rises to 4.50%, your mortgage rate becomes 5.25%.
Tracked rate
4.00%
Margin
+0.75%
Mortgage rate
4.75%
Calculate tracker mortgage payments
Use the UK Mortgage Repayment Calculator to test different tracker-rate scenarios and see how payments change.
Why tracker mortgages matter
Tracker mortgages matter because they expose your monthly payment to rate movement. That can be useful when rates fall, but painful when rates rise.
- Payments can change: your monthly cost can rise or fall during the tracker period.
- Rate falls may help: your payment may reduce if the tracked rate falls.
- Rate rises can hurt: your payment may increase if the tracked rate rises.
- Terms matter: margins, collars, fees and early repayment charges vary by product.
- Budget buffer matters: borrowers need room for possible payment increases.
Tracker mortgage vs fixed-rate mortgage
A tracker mortgage gives exposure to rate movement. A fixed-rate mortgage gives payment certainty for the fixed period.
| Feature | Tracker mortgage | Fixed-rate mortgage |
|---|---|---|
| Monthly payment | Can rise or fall | Predictable during the fixed period |
| Main benefit | Can benefit if the tracked rate falls | Payment certainty |
| Main risk | Payment may rise if the tracked rate rises | You may miss out if rates fall |
| Usually suits | Borrowers who can handle payment movement | Borrowers who value stability |
Tracker mortgage vs standard variable rate
A tracker and a standard variable rate are both variable, but they are not the same. A tracker normally follows a defined reference rate plus a margin. A standard variable rate is the lender’s own variable rate and may not move in the same way.
| Feature | Tracker mortgage | Standard variable rate |
|---|---|---|
| Rate basis | Usually reference rate plus margin | Lender’s standard rate |
| Movement | Usually moves with the tracked rate | Can change when the lender changes it |
| Clarity | Often clearer because the formula is stated | Less direct because the lender sets the rate |
| Common use | Chosen as a mortgage product | Often used as a follow-on rate after a deal ends |
Pros and cons of a tracker mortgage
Pros
- You may benefit if the tracked rate falls.
- Some tracker deals can be more flexible than fixed deals.
- The pricing formula can be clear if the reference rate and margin are stated.
- It can suit borrowers who expect rates to fall and can afford to be wrong.
Cons
- Your monthly payment can rise if the tracked rate rises.
- Budgeting can be harder than with a fixed-rate mortgage.
- Product fees, collars or early repayment charges can still apply.
- A low starting payment can become expensive if rates move against you.
Who a tracker mortgage may suit
A tracker mortgage may suit borrowers who understand variable-rate risk and have enough monthly budget to handle payment increases.
- Borrowers with spare monthly income and a strong cash buffer.
- People who want possible benefit if rates fall.
- Borrowers who may move or remortgage soon and value flexibility.
- People who understand the margin, fees, collar and exit terms.
- Borrowers who are comfortable with payments changing over time.
Simple test: before choosing a tracker, calculate the payment if the rate were 1% or 2% higher.