Should You Get a Tracker or Fixed Rate Mortgage

In light of recent interest rate hikes by the Bank of England up to 3%, we take a snapshot of the best rates available on the market today for fixed and tracker mortgage products, and see how they compare.

We also go through the pros and cons of fixed rate mortgages compared to trackers, to help you decide what type of mortgage is right for you.

In this guide: 

What is a fixed rate mortgage?
What fixed rate terms are available?
What interest rates can I get?
What happens at the end of my fixed rate mortgage term?
What is a Tracker Mortgage?
What are the pros and cons of a fixed rate mortgage?
What are the pros and cons of a tracker mortgage?
Are interest rates going to rise again in 2023 and beyond?
How can a Mortgage Broker Help? 

What is a fixed rate mortgage?

A fixed mortgage is a mortgage with a guaranteed rate of interest for a specified term.

This means that the interest rate you pay on your loan will not change for the duration of your fixed term.

This doesn't mean the entire duration of your entire mortgage - which could be 25 years or more - but just the duration of your current deal.

What fixed rate terms are available?

You can get fixed rate mortgages for various term lengths, but most are typically 2 year or 5 year fixed terms.

3 year fixed rates are also available from some lenders, and even 10 year fixed rate mortgages have become popular in response to prolonged low interest rates in the UK before 2022.

What interest rates can I get?

Below is a snapshot of some of the latest mortgage rates we've secured for our clients. 

*Overall Cost For Comparison

What happens at the end of my fixed rate mortgage term?

After the duration of your fixed rate term, your mortgage will revert to your mortgage lender’s SVR (Standard Variable Rate). This rate will usually be considerably higher than a fixed or tracker interest rate.

We recommend thinking about either switching your mortgage with your existing lender to a new product or remortgaging to a new lender at this point to avoid paying significantly high-interest rates on an SVR mortgage. 

What is a Tracker Mortgage?

A tracker mortgage is a mortgage with an interest rate linked to the Bank of England’s base rate.

For example, you could get a tracker mortgage that’s interest rate will always remain at 0.75% above the base rate.

When the base interest rate increases, your monthly mortgage repayments will go up. When the base rate decreases, they’ll go down. The 0.75% difference will stay the same for the duration of your tracker mortgage term.

What are the pros and cons of a fixed rate mortgage?

Pros:

• You know exactly how much your mortgage repayments will be for the duration of your fixed term
• Your mortgage interest rate can't increase during your fixed term, no matter what the base rate does

Cons:

• You could be paying a higher interest rate than a tracker mortgage if the base rate stays low or goes down
• The longer your fixed term, the higher the interest rate you’ll have to pay 

What are the pros and cons of a tracker mortgage?

Pros:

• You could pay a cheaper rate than fixed rate products, especially if the base rate falls or stays the same

Cons:

• Your monthly mortgage payments could increase or fluctuate throughout your term

Are interest rates going to rise in 2023 and beyond?

Nobody knows for sure if interest rates will continue to rise in the UK, but many economists believe that they must go up further at some point to keep inflation down.

Even with the base rate rise to 3%, ongoing political and economic instability in the UK and around the world means that many mortgage lenders are anticipating further rate hikes. 

For more on the topic, read our blog: NEWS: Are Mortgage Rates Going Up in Response to Interest Rate Hikes? 

Ask for help

If you’re unsure what kind of product is best for you, having a conversation with one of our trusted mortgage advisers will give you peace of mind that you’re making the right decision.

We can help you decide on the type of mortgage that's right for you. And, we can negotiate the best interest rates with lenders and get access to some fixed rate deals that aren’t available to customers going direct.

Contact us to arrange a convenient time for an in-depth first discussion with one of our trusted finance brokers and see how we can help:

Call us on 0117 959 5094 to discuss your requirements.

Or you can book a free consultation with one of our expert advisors at a convenient time for you, below.

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