Skip to main content

Is a Tracker Mortgage Right for You?

What is a Tracker Mortgage?

The interest rate on a tracker mortgage is pegged to the Bank of England base rate. So, when the base rate moves so will your interest rate, and your monthly repayments. These mortgages tend to be cheaper than fixed rate mortgages as you don't have the security of knowing exactly what you will pay each month.

Who Should Get One?

If you get a tracker mortgage your monthly repayments will rise and fall depending on what the Bank of England base rate does. If the base rate rises so will your interest rate, making your payments immediately higher. So, making a decision to get a tracker mortgage depends on what you think the base rate is going to do. No-one has a crystal ball to tell them exactly what will happen to interest rates but experts can make educated guesses. You can find out the very latest rate predictions from our panel of experts here. If you believe interest rates aren’t going to rocket, and you could afford it if they did, then a tracker rate mortgage is for you. But, if your budget is tight and you don’t want the worry of rising interest rates the security offered by a fixed-rate mortgage might be better.

How Long Should I Track For?

Tracker mortgage deals typically run for two to five years, or the entire term of the mortgage if it is a lifetime tracker. How long a deal to go for comes down to two things:

  • What do you think is going to happen to interest rates? If you think they aren’t going to move substantially for three years – go for a three year deal.
  • How long are you going to live there? If you know you are going to move on in two years time then don’t lock into a longer deal – you’ll be penalised if you want to exit early with most mortgages.

What Additional Fees Will I Pay?

Arrangement fees

This is the charge levied by the lender for setting up your mortgage. They have been on the rise of late and can now be as much as £2,000. You don’t have to pay that upfront, you can add it to your borrowing, but you’ll then pay interest on it. High arrangement fees aren’t always a dealbreaker. Many low-rate deals carry a high arrangement fee, so if you have a large mortgage you could save money by paying more upfront in return for a much lower interest rate.

Early redemption charges

If you want to leave your deal early many lenders will penalise you. The penalty can by calculated in a variety of ways:

  • A percentage of the original loan
  • A percentage of the balance still owed
  • A percentage of the amount you’ve already paid
  • A number of months’ interest
  • A fixed fee

You’ll trigger a penalty if you pay off your mortgage entirely and, sometimes, if you try to overpay.

Exit fee

Some lenders will charge you to close a mortgage once you’ve paid off your debt. It costs lenders around £50 to sort out the paperwork to close a mortgage but, despite the regulator stating that lenders must not profit from exit fees, many charge as much as £200. If you are being charged a fortune complain – first to your lender and if that doesn’t work to the Financial Ombudsman Service.

WARNING – Don’t Get Caught out when Your Rate Ends

Although you may be borrowing money over a 25-year period, unless you went for a lifetime tracker, your special interest rate deal will eventually run out. When it does, in two to five years depending on your deal, you’ll automatically be switched over to the lenders standard variable rate (SVR). In most cases this rate will be significantly higher than the tracker rate you were on. So, don’t be one of the millions of people wasting thousands in unnecessary interest payments – make sure you switch to a new deal. Start looking around three months before your deal ends to ensure you have enough time to switch before the SVR kicks in. You can compare the best deals here.

TotallyMoney Logo

We're on a mission to improve the UK's credit score and help people move on up to a better future.


TotallyMoney is an independent credit broker, not a lender. Our comparison service works with most leading lenders, covering the majority of the market. Though we may be paid a fee by lenders or brokers this never influences how our products are ranked.

We don't provide financial advice. Product information is obtained from independent sources and rates displayed may vary depending on your personal circumstances. While we make every effort to ensure that information is up to date, you should always confirm the terms of the offer with the product provider.

TotallyMoney is owned and operated by TotallyMoney Limited which is registered in England and Wales (Company Registration Number 06205695). TotallyMoney Limited is an Appointed Representative of TM Connect Limited, which is registered in England and Wales (Company Registration Number 06967012) and authorised and regulated by the Financial Conduct Authority in respect of consumer credit related activities (FCA FRN: 511936). Trading Address and Registered Office: Chapter House, 16 Brunswick Place, London N1 6DZ. Credit is available, subject to status, only to UK residents aged 18 or over.

We use cookies as described in our Cookie Policy. Continue browsing or click to accept.