Tracker mortgages

Tracker mortgages go up and down in line with the Bank of England base rate – so they’re a popular choice of mortgage, especially when interest rates are low. But is it the right type of mortgage for you? Here’s what you need to know about tracker mortgages and how they work.

Tracker mortgages go up and down in line with the Bank of England base rate – so they’re a popular choice of mortgage, especially when interest rates are low. But is it the right type of mortgage for you? Here’s what you need to know about tracker mortgages and how they work.

Mark Gordon
From the Mortgages team
minute read
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Posted 24 FEBRUARY 2021

What is a tracker mortgage?

A tracker mortgage is a variable rate mortgage, where the interest rate you pay is based on the official borrowing rate of the Bank of England – called the base rate. This means that your mortgage repayments can go up or down.

How does a tracker mortgage work?

As a general rule, tracker mortgage interest rates don’t exactly match the Bank of England base rate – they’re usually set at a percentage above, then move up or down in line with the base rate.

Let’s say your tracker mortgage is set at 1% above the Bank of England base rate. The current base rate is 0.1%, as of December 2020, so the interest rate on your tracker mortgage would be the base rate (0.1%) + the set percentage rate (1%) = 1.1%.

At the moment, the Bank of England base rate is at an all-time low because of the coronavirus pandemic. If the base rate were to increase, so would your tracker mortgage repayments.

Is a tracker mortgage right for me?

If you can find a tracker mortgage with a low set percentage rate, it can be good value – especially if the economy’s not doing so well.

The Bank of England decides whether to change the base rate on the first Thursday of every month. But in recent years it hasn’t changed that much – it’s remained less than 1% for the past 10 years. Since the coronavirus pandemic, that’s dropped to a record low of just 0.1%. So, although the economy has taken a battering because of Covid-19, it does mean that tracker mortgages rates offer pretty good value at the moment.

But remember, the base rate can go up. Once the economy starts to pick up, your interest rate will rise. If this happens, you’ll need to be sure you can afford your mortgage repayments.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Tracker mortgages can be tricky when it comes to budgeting. If you prefer the certainty of knowing how much you’ll need to pay each month, then it’s not the mortgage for you – you might be better off with a fixed-rate mortgage.

How long does a tracker mortgage last?

Tracker mortgages typically have an introductory period of between 1-5 years. After that, you’ll be put on your lender’s standard variable rate (SVR), which can often be much higher.

When your tracker introductory period is due to end, it’s a good idea to look around at other mortgage options. You might want to consider remortgaging to a better deal.

It’s also possible to find a lifetime tracker mortgage. This typically lasts as long as your mortgage – for example, 25 years.

Just be aware that you can’t predict or plan your mortgage repayments on a tracker mortgage. A long-term tracker could be risky as you never know how much your repayments will be from one month to the next. Lifetime trackers also tend to have higher interest rates than shorter deals.

What is a collar rate?

Some lenders put a collar or ‘floor’ rate on their tracker mortgages. It’s a limit to how low your mortgage interest rate can go. In other words, your rate will never drop below that limit, even if the Bank of England base rate does.

Let’s say your tracker mortgage comes with a collar rate set at 2%. Even if the base rate dropped to a really low level (rather like now), the minimum amount of interest you’d ever be charged would be 2%.

What happens when my tracker mortgage deal ends?

Once the introductory period is up, your lender will typically put you on their standard variable rate. SVR mortgages usually have much higher interest rates, so it’s a good idea to shop around and remortgage onto a better rate when your tracker deal ends.

What’s the difference between a tracker mortgage and a standard variable mortgage?

Although standard variable rate mortgages also tend to follow the Bank of England base rate, every lender sets their own rate. This means they can change it whenever they want.

Lenders’ default standard variable rates also tend to be higher – typically a few percentage points above the Bank of England base rate.

Tracker mortgage vs fixed-rate mortgage?

Unlike a tracker, a fixed-rate mortgage isn’t variable. That means your repayments will remain the same for the length of the fixed-rate deal.  
A fixed-rate mortgage can be good for budgeting as you know exactly how much you’ll be paying each month.  

What are the pros and cons of a tracker mortgage?


  • if the base rate drops, so will your repayments
  • some tracker mortgages don’t have an early repayment fee – if interest rates rise, you could switch to a cheaper mortgage deal without paying a penalty
  • tracker mortgages can be good value when the base rate is low


  • monthly repayments can go up if the base rate rises
  • if your tracker mortgage has a collar, you won’t benefit if the base rate plummets to an all-time low
  • some tracker mortgages might charge a fee if you want to remortgage or pay off your mortgage early
  • if your repayments go up and you can’t afford to pay them, you risk losing your home

Comparing mortgages

If you think a tracker mortgage might be right for you, make sure you check the terms and conditions carefully before you go ahead and apply. Look out for any costs and fees and whether there’s a collar rate attached. You’ll also want to be sure you can afford the repayments if interest rates rise.

If you’d prefer to go with the certainty of a fixed-rate mortgage, you can compare through us.

We’ve also partnered with London & Country Mortgages Ltd (L&C)** who can offer fee-free, expert advice to help you find the right mortgage to suit your needs. Get in touch with them here:

Go to L&C mortgages

About London & Country Mortgages Ltd (L&C)

**London & Country Mortgages Ltd (L&C) are a multi-award winning mortgage broker with over 20 years’ experience in helping people secure their perfect mortgage. Advice is provided by L&C, who are authorised and regulated by the Financial Conduct Authority (143002).

L&C are not part of Compare the Market Limited. Compare the Market receives a % of the commission that our partner London & Country earns. All applications are subject to lending and eligibility criteria.

L&C will not charge you a broker fee should you decide to proceed with a mortgage.

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