Fixed vs tracker mortgages (UK): how to compare risk, fees, and flexibility
Compare fixed vs tracker mortgages in the UK: how Bank Rate changes affect trackers, how fees and ERCs change the true cost, and worked examples to budget safely.
Summary
Fixed and tracker mortgages solve different problems:
- A fixed rate gives you payment certainty for a set period (often 2, 3, 5+ years).
- A tracker usually moves up and down with Bank Rate (plus a margin), so your payment can change when rates change.
To compare them properly, look at:
- Risk: can your budget handle rate rises?
- Flexibility: are you likely to move or remortgage soon?
- Total cost: rate + fees + any early repayment charges (ERCs).
If you want to run numbers quickly, start with the Mortgage calculator.
- Calculator: /mortgage/
Key terms (quick definitions)
- A deal period: the initial product period (e.g. “2-year fixed”) before you move to SVR unless you switch.
- SVR: the lender’s Standard Variable Rate. See: Standard Variable Rate (SVR).
- Arrangement fee: a product fee for a mortgage deal. See: Arrangement fee.
- APRC: a standardised “total cost of credit” metric that helps comparison. See: APRC.
How it works
Fixed rate (what you’re buying)
- Your interest rate is fixed for a set period.
- Your monthly repayment is more predictable, which makes budgeting easier.
- Many fixed deals have an ERC if you leave early.
Tracker (what you’re buying)
- Your interest rate is typically set as Bank Rate + a margin (e.g. Bank Rate + 0.75%).
- When Bank Rate changes, your rate changes too (the timing depends on the product terms).
- Some trackers have features like floors. Always check your illustration/offer.
The comparison that matters
When you compare fixed vs tracker, try this order:
- Budget test: could you afford the tracker if rates rose by 1%–2%?
- Time horizon: how long will you realistically keep this mortgage deal?
- True cost: include fees and ERCs, not just the headline rate.
- Fallback: what happens if you do nothing at the end (SVR risk).
Worked examples
These examples use interest-only maths to keep the comparison transparent. Real repayment mortgages include capital repayment (amortisation), so the exact payment will differ — but the direction of change with rate moves is the same.
Example 1: What a 0.25% rate rise does to a tracker
Assume:
- Mortgage balance: £200,000
- Tracker rate today: 5.00%
- Interest-only monthly interest: (£200,000 × 5.00% ÷ 12 = £833.33)
If the rate rises by 0.25% to 5.25%:
- New monthly interest: (£200,000 × 5.25% ÷ 12 = £875.00)
- Increase: £41.67/month
Example 2: Fixed vs tracker “all-in” over 2 years (simple fee view)
Assume the same balance (£200,000) and interest-only comparison:
- Option A (fixed): 5.10%, fee £0
- Option B (tracker): 4.90%, fee £999
Monthly interest:
- A: (£200,000 × 5.10% ÷ 12 = £850.00)
- B: (£200,000 × 4.90% ÷ 12 = £816.67)
Monthly saving for B vs A: £33.33.
Over 24 months, the saving is (£33.33 × 24 ≈ £799.92).
If B has a £999 fee, then B is still ~£199 worse over 2 years in this simplified comparison, despite the lower rate. (That’s exactly why fees matter.)
Example 3: The budget test for a tracker
Assume:
- Balance: £250,000
- Current tracker: 4.75%
- “Stress” scenario: +1.50% (to 6.25%)
Interest-only monthly interest:
- At 4.75%: (£250,000 × 4.75% ÷ 12 ≈ £989.58)
- At 6.25%: (£250,000 × 6.25% ÷ 12 ≈ £1,302.08)
Difference: about £312.50/month.
If that increase would break your budget, a fixed rate might be worth paying more for.
Common mistakes
- Comparing headline rates only and ignoring fees and ERCs.
- Not doing a rate-rise budget test for a tracker.
- Forgetting what happens at the end of the deal (SVR risk).
- Assuming all trackers behave identically (floors and timing can vary).
- Taking a long fixed rate without thinking about likely life changes (moving, remortgaging, overpaying).
- Ignoring APRC/total cost information and focusing on the advert.
What to do next
- Related guides:
- Related glossary:
- Related calculators: