Tracker Mortgage UK - Your Complete Guide
A tracker mortgage is a type of variable rate mortgage where your interest rate directly follows the Bank of England base rate. When the base rate changes, your mortgage rate changes too - usually by the same amount. This means your payments can go up or down over time, unlike a fixed rate mortgage where payments stay the same.
Tracker Mortgages at a Glance
4.5%
Current base rate
+0.5-1.5%
Typical margin
2-5
Years typical term
Low/None
Early exit fees
How Does a Tracker Mortgage Work?
A tracker mortgage is linked directly to the Bank of England base rate by a fixed margin. Your rate is typically expressed as "base rate + X%". When the Monetary Policy Committee meets (usually 8 times per year) and changes the base rate, your mortgage rate changes accordingly.
Example: Base Rate + 0.75%
| Base Rate | Your Rate | Monthly Payment (£250K) |
|---|---|---|
| 4.00% | 4.75% | £1,423 |
| 4.50% | 5.25% | £1,496 |
| 5.00% | 5.75% | £1,571 |
| 3.50% | 4.25% | £1,352 |
Based on a £250,000 mortgage over 25 years. Use our mortgage calculator to see payments at different rates.
When Rate Changes Take Effect
Most trackers update your rate within 1 month of a base rate change, though the exact timing varies by lender. Your monthly payment will then be recalculated based on the new rate. Some lenders apply changes from the following month's payment, others may take longer.
Understanding Collars and Caps
Collar: A minimum rate your mortgage can't fall below, even if the base rate drops further. Example: a 2% collar means you'll never pay less than 2% even if the base rate hits zero.
Cap: A maximum rate your mortgage can't exceed, even if the base rate rises dramatically. Caps are rare but offer protection against extreme rate rises.
Current Tracker Mortgage Rates
With the Bank of England base rate currently at 4.50%, tracker mortgages are priced at a margin above this. The exact margin depends on your deposit size, credit history, and the tracker term.
Indicative Tracker Rates (January 2026)
Current base rate: 4.50%
| LTV | Margin | Your Rate | 2-Yr Fixed (comparison) |
|---|---|---|---|
| 60% LTV | Base + 0.49% | 4.99% | 4.20% |
| 75% LTV | Base + 0.74% | 5.24% | 4.50% |
| 90% LTV | Base + 1.24% | 5.74% | 5.00% |
Note: Trackers are currently higher than fixed rates. Visit our mortgage rates page for the latest comparison.
Tracker vs Fixed Rate Mortgage
The choice between a tracker and a fixed rate mortgage depends on your financial situation, risk tolerance, and view on future interest rates.
| Feature | Tracker | Fixed |
|---|---|---|
| Payment Certainty | Varies with base rate | Same every month |
| If Rates Fall | Your rate drops | Stuck at fixed rate |
| If Rates Rise | Your rate increases | Protected |
| Early Exit Fees | Often none/low | 1-5% typically |
| Transparency | Know exactly what affects rate | Fixed regardless of market |
Current Market Context
In early 2026, tracker rates are typically higher than fixed rates because markets expect the base rate to fall. Trackers may become more attractive if and when rates decrease, as you'd benefit from the reductions. However, you're taking on uncertainty that fixed rate holders avoid.
Tracker Mortgage Pros and Cons
Advantages
- ✓Benefit from Rate Cuts
When the base rate falls, your payments automatically reduce
- ✓Transparency
You know exactly what determines your rate - it's linked to the published base rate
- ✓Flexibility
Often have no or low early repayment charges, making it easier to remortgage
- ✓Fair Pricing
Your rate moves with the market rather than being artificially set by the lender
Disadvantages
- ✗Payment Uncertainty
Monthly payments can increase significantly if the base rate rises
- ✗Budgeting Difficulty
Hard to plan long-term finances when payments may change
- ✗Collar Limitations
Many trackers have floors that prevent you benefiting fully from rate cuts
- ✗Currently Higher Rates
Often more expensive than fixed rates in the current market
When Should You Choose a Tracker Mortgage?
A tracker mortgage might be right for you if:
You Expect Rates to Fall
If you believe the base rate will decrease, a tracker lets you benefit from lower payments automatically.
You Have Financial Headroom
You can comfortably afford payments even if the rate rises by 2-3%, giving you a buffer against increases.
You Want Flexibility
Planning to move or remortgage soon? Trackers often have no ERCs, making exit easier and cheaper.
You Value Transparency
You prefer knowing exactly what determines your rate rather than being subject to lender discretion.
Short-Term Planning
You only need a mortgage for a few years and want flexibility without penalty fees.
You're Risk-Tolerant
You're comfortable with payment fluctuations and prefer potential savings over certainty.
When to Avoid Trackers
- ✗ Your budget is tight and you couldn't handle payment increases
- ✗ You value peace of mind and predictable monthly costs
- ✗ You think interest rates will rise significantly
- ✗ You're a first-time buyer settling into homeownership
- ✗ Fixed rates are significantly cheaper (as they often are now)
Tracker Mortgage FAQs
What is a tracker mortgage?
A tracker mortgage has an interest rate that follows (tracks) the Bank of England base rate at a set margin above or below. For example, 'base rate + 0.5%' means your rate is always 0.5% above the current base rate. When the base rate changes, your rate changes too, usually within a month.
How is a tracker different from a variable rate mortgage?
A tracker directly follows the Bank of England base rate by a fixed margin. A Standard Variable Rate (SVR) is set by your lender and can change at any time regardless of the base rate. Trackers are more predictable because you know exactly how rate changes will affect you.
What happens if the base rate goes negative?
Most tracker mortgages have a 'collar' or floor that prevents your rate from falling below a certain level (often 0%). Check your mortgage terms - some trackers without a collar could theoretically have very low rates if the base rate turned negative, though this is rare.
Can I switch from a tracker to a fixed rate?
Yes, usually by remortgaging either with your current lender (product transfer) or a new lender. Check if your tracker has Early Repayment Charges - many trackers have no ERCs or only apply them for the first 2-3 years, making switching easier.
Are tracker mortgages good for first-time buyers?
Trackers can work for first-time buyers who are comfortable with payment uncertainty and have financial headroom for rate increases. However, most FTBs prefer fixed rates for the certainty when settling into homeownership. Consider your risk tolerance carefully.
What's a lifetime tracker mortgage?
A lifetime tracker runs for the entire mortgage term without reverting to the SVR. These are rare but offer the benefit of never needing to remortgage. However, you're exposed to rate changes throughout, which could be decades of uncertainty.
Related Mortgage Tools & Guides
Summary
A tracker mortgage directly follows the Bank of England base rate, meaning your payments rise and fall with interest rate decisions. While this offers transparency and flexibility (often with no early repayment charges), it also brings uncertainty about future payments. Currently, fixed rates are often cheaper than trackers, so trackers mainly appeal to those who expect rates to fall or want easy exit options. Use our mortgage calculator to model different rate scenarios, and compare options on our mortgage rates page. Consider speaking to an FCA-registered mortgage broker to help decide whether a tracker is right for your circumstances.