A tracker mortgage has an interest rate that moves up and down in line with an economic indicator, usually the Bank of England base rate.
Tracker mortgages often have lower initial rates than fixed rate mortgages, but the rates are variable so your monthly payments can change. If you prefer to be sure your payments will stay the same, take a look at our fixed rate mortgages section.
What is a tracker mortgage?
A tracker mortgage is a type of variable rate mortgage. Its interest rate rises and falls at a fixed percentage above the base rate. Some tracker mortgages are 'capped' or 'collared', meaning that there is a limit on how high or low your interest rate can rise if the base rate changes significantly.
Tracker mortgages usually 'track' for an initial period (e.g. three years) then revert to your provider's standard variable rate (SVR) when the introductory period ends. Some lenders also offer "lifetime tracker" deals that follow the base rate for the length of the mortgage.
Benefits of tracker mortgages
- Transparency – you know that your interest rate can only increase because of economic factors, rather than commercial reasons for the lender.
- Lower initial rates – The starting rates for tracker mortgages are usually lower than their fixed rate equivalents. While interest rates remain low, so will your mortgage payments.
- Great when rates drop – If you think the base rate might fall, you stand to pay less every month (or repay your loan faster).
Drawbacks of tracker mortgages
- Risk of rates rising – You can't predict exactly if and when your mortgage payments will increase, or by how much.
- Commitment – You're tied into the tracker for the initial period; if you want to change your mortgage during this time, it will usually cost you an Early Repayment Charge.
- Harder to compare – Because the rate could change at any time, it's harder to work out how much your mortgage will cost in the long term.
If you're considering a tracker mortgage, it's essential to make sure you could still make the repayments if interest rates go up. Use our mortgage calculator to check what would happen to your payment amount. This kind of "stress test" is now part of lenders' mortgage affordability checks, but more importantly, being unable to keep up with mortgage payments puts your property at risk of repossession.
Compare tracker mortgages
Go direct, or get advice
If you're comfortable making your own financial decisions, our tables show all of today's current mortgage deals and you can call lenders directly for more information.
If you'd prefer to get advice on choosing the right mortgage, we can put you in touch with a mortgage adviser.