Fixed-rate vs tracker mortgages — UK explainer
In short. A fixed-rate mortgage locks in the interest rate for a set period (commonly 2, 3, 5 or 10 years). A tracker follows Bank Rate plus a fixed margin and changes whenever Bank Rate changes. Fixed gives payment certainty but usually charges early repayment charges; trackers move with the market and often have lower or no ERCs.
Roughly 80% of UK mortgage borrowers are on a fixed rate (UK Finance, 2025). Tracker, discount and standard variable rate (SVR) products make up the rest. Each has a defined regulatory description set out in the FCA's Mortgages and Home Finance Conduct of Business sourcebook (MCOB).
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How each product type works
A fixed rate is set at outset and does not change for the deal period regardless of what happens to Bank Rate or the lender's SVR. At the end of the deal the loan reverts to the lender's standard variable rate unless the borrower switches.
A tracker rate is the Bank of England Bank Rate plus a stated margin (e.g. 'Bank Rate + 0.74%'). When Bank Rate changes, the tracker rate changes too — usually from the start of the next month.
A discount variable rate is the lender's SVR minus a stated discount for a set period. It is variable because the SVR itself can change at the lender's discretion.
Early repayment charges (ERCs)
Most fixed-rate deals have ERCs of around 1–5% of the loan during the fixed period, often tiered (e.g. 5% in year 1, 4% in year 2, falling to 1% in year 5). Lifetime trackers tend to have no ERCs. Time-limited 'penalty trackers' may have ERCs during an introductory period.
FCA rules require ERCs to be a 'reasonable pre-estimate' of the lender's costs, displayed in the European Standardised Information Sheet (ESIS) the borrower receives before completing.
What changes the choice
- Expectations for Bank Rate over the deal period (trackers benefit when rates fall, hurt when they rise)
- Whether the borrower may move home, overpay heavily, or come into a lump sum during the deal
- Loan-to-value: higher LTV deals usually attract higher rates for both fixed and tracker
- Personal preference for payment certainty vs market exposure
FAQ
- Can I overpay on a fixed-rate mortgage?
- Most fixed-rate deals allow overpayments of up to 10% of the outstanding balance per year without triggering an ERC. Above that limit the ERC applies. The exact figure is in the offer document.
- What is the standard variable rate (SVR)?
- Each lender's SVR is the default rate the loan moves to after a fixed or tracker period ends. It is set at the lender's discretion (not directly tied to Bank Rate) and is typically several percentage points above the cheapest deals on the market.
- Are 10-year fixes worth it?
- Ten-year fixes give long payment certainty but usually charge higher rates and longer/heavier ERC schedules. They suit borrowers who expect to stay in the same home for the full term; moving usually requires 'porting' the deal subject to the lender's reassessment.