Fixed, Tracker or Variable: How Mortgage Rate Types Compare
The rate type decides whether your monthly payment can change, and by how much. Each option trades certainty against flexibility in a different way.
What to know
- A fixed rate keeps your payment the same for the deal period, usually with early repayment charges if you leave.
- A tracker follows the Bank of England’s Bank Rate plus a set margin, so payments move when Bank Rate moves.
- A discount deal or standard variable rate follows the lender’s own rate, which the lender can change.
- Compare the total cost over the deal period, including fees, rather than the headline rate alone.
Every mortgage charges interest at a rate that is either fixed for a period or able to change. That single choice shapes how predictable your monthly payment is, what happens when interest rates move and how easily you can leave the deal.
Fixed-rate mortgages
The interest rate is set for an agreed period, commonly two, three or five years and sometimes longer. Your monthly payment stays the same for that period, whatever happens to interest rates elsewhere.
- Main benefit: certainty for budgeting.
- Main drawback: you won’t benefit if rates fall, and leaving early usually triggers an early repayment charge.
- At the end: you move onto the lender’s standard variable rate unless you arrange a new deal.
Tracker mortgages
A tracker follows the Bank of England’s Bank Rate plus a fixed margin, such as Bank Rate plus 1%. The Bank’s Monetary Policy Committee reviews Bank Rate eight times a year, and your payment moves when it does.
- Some trackers have no early repayment charges, which suits people who expect to move or overpay.
- Some have a collar, a floor below which the rate won’t fall.
- Lifetime trackers run for the whole mortgage term.
Discount deals and the standard variable rate
A standard variable rate (SVR) is the lender’s own default rate. The lender can change it at any time, and it doesn’t have to follow Bank Rate. A discount mortgage charges the SVR minus a set amount for a period, so your payment changes whenever the lender changes its SVR.
Side by side
| Rate type | Can your payment change? | What drives the rate | Early repayment charges |
|---|---|---|---|
| Fixed | No, during the fixed period | Set at the start | Usually, during the fixed period |
| Tracker | Yes | Bank Rate plus a margin | Sometimes |
| Discount | Yes | Lender’s SVR minus a discount | Often, during the deal |
| Standard variable rate | Yes | Lender’s decision | Rarely |
Handy tip
Work out what each deal costs over its full term, including the arrangement fee. A slightly higher rate with no fee can be cheaper than a low rate with a large fee, especially on a smaller loan.
Fees and early repayment charges
Arrangement fees can be paid upfront or added to the loan. Adding a fee means paying interest on it for the life of the mortgage. Early repayment charges are usually a percentage of the amount you repay, and they often step down each year of the deal. Many lenders let you overpay a set amount each year, often up to 10% of the balance, without a charge, but the allowance varies.
Watch out
Your home may be repossessed if you do not keep up repayments on your mortgage. Before choosing a variable rate, check that you could still afford the payment if rates rose.
Choosing the right type for you
Start with a few questions. How much would a rise in payments strain your budget? Are you likely to move, or to repay a large lump sum, during the deal? Would you rather have certainty or the chance of paying less if rates fall?
Our guides to how lenders assess affordability and what to do when a deal ends cover the next steps. A mortgage adviser can compare deals across the market and explain which suits your circumstances.
Your questions
What happens when a fixed-rate deal ends?
You usually move onto the lender’s standard variable rate, which is often higher. Most borrowers arrange a new deal before that happens.
Can a tracker rate fall below a certain level?
Some trackers have a collar, a minimum rate the mortgage won’t go below even if Bank Rate falls further. Check the product terms.
Is a longer fix always safer?
It gives certainty for longer, but early repayment charges usually last for the whole fixed period. That matters if you might move or want to switch.
This guide explains how UK borrowing works in general terms and isn’t financial advice. Rates, rules and lender criteria change, so check the details with the lender, GOV.UK or the Financial Conduct Authority before you decide. For advice on your own circumstances, speak to an FCA-authorised mortgage or financial adviser. If you borrow against your home, it may be repossessed if you do not keep up repayments.
