Should You Get a Tracker or Fixed Rate Mortgage in 2022?

06-August-2022
06-August-2022 16:23
in Mortgage
by Sam Hodgson
Should You Get a Tracker or Fixed Rate Mortgage in 2022?

In light of the recent interest rate hikes by the Bank of England up to 1.75%, we look at a snapshot of the best rates available on the market today for fixed and tracker mortgage products to see how they compare.

We also look at the pros and cons of fixed rate mortgages compared to tracker mortgages and compare each product to varying scenarios.

In this guide: 

What is a fixed rate mortgage?
What fixed rate terms are available?
What happens at the end of a 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 2022 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. 

What fixed rate terms are available?

You can get fixed rate mortgages for various term lengths, the most common being 2 year or 5 year fixed terms.

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

mortgage deals

What happens at the end of a 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) which will usually be considerably higher than a fixed or tracker interest rate.

We’d recommend thinking about remortgaging at this point to avoid paying significantly high-interest rates for longer than you have to on a variable rate mortgage. 

What is a Tracker Mortgage?

A tracker mortgage is a mortgage with a rate of interest that’s 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 is increased, your monthly mortgage repayments will go up, and when the base rate is decreased, they’ll go down. The 0.75% difference will stay the same for the duration of your tracker mortgage term.

Current Mortgage Rates 

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

Pros:

  • You know exactly how much your mortgage repayments will be for the length of your fixed term
  • Your mortgage interest rate cannot go up during your fixed term

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 and generally fluctuate throughout your term

Residential Mortgage 2022

Are interest rates going to rise again in 2022 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 1.75%, with Russia's invasion of Ukraine and energy prices set to rise again later this year, many mortgage lenders will be anticipating further rate hikes. 

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

Quick Mortgage Deal Case Study

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 the peace of mind that you’re making the right decision.

Not only can we help with deciding on your type of mortgage, but we can also 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 0203 900 4322 to discuss your requirements.

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

Book Consultation