A tracker mortgage follows the Bank of England base rate, so your monthly payments go down when it's cut and up when it rises. This guide explains how trackers work, what caps and collars do to your rate, the fees to watch for, and how they compare with a fixed rate, so you can weigh up whether one suits you.
“Tracker mortgages can be a brilliant option when you understand how they work. They give you real flexibility, clear pricing and the chance to benefit as rates fall all while keeping you in control. For many borrowers, that mix of freedom and transparency feels incredibly empowering. The key is just knowing how the numbers might move, and that’s where good advice makes all the difference. Once you’ve seen the different choices laid out, choosing the right deal becomes much easier than you’d think.”
Rachel Geddes
Strategic Lender Relationship Director
What is a tracker mortgage?
A tracker mortgage is a variable rate mortgage where your interest rate follows the Bank of England base rate (sometimes known as ‘bank rate’). In practice, it works like this:
• Base rate goes up → your rate goes up → you pay more
• Base rate goes down → your rate goes down → you pay less
Because your payments move with the base rate, tracker mortgages are more of a gamble than fixed rate mortgages, where your monthly cost stays the same for a set amount of time.
Trackers usually sit above the base rate. So, if your deal is ‘base rate + 0.4%’ and the base rate is 3.75%, your rate will be 4.15%. If the base rate rises to 4%, your rate becomes 4.4%. You'll always know exactly why your rate has moved, because it's tied to a rate that's published and reported everywhere, not something your lender can change whenever they like.
You don't need a degree in economics to take out a tracker home loan. You just need to be aware that your payments won't necessarily stay the same each month.
Use our Mortgage Repayment Calculator to find out how much your mortgage payments are likely to be based on interest rates and terms.
What is a collar?
Don't worry, we haven't drifted into dog walking tips. A collar (or "floor") is just the minimum interest rate your tracker mortgage can ever drop to, even if the Bank of England base rate falls much further.
So if the base rate drops to 1% but your tracker has a 2% collar, your rate won't go below 2%. It's one of the ways lenders protect themselves.
The good news is most trackers use a basic 0% collar, which just means the lender won't pay you interest if the base rate ever goes negative (which technically possible, but unlikely.)
What is a cap?
Sometimes a tracker mortgage might have a cap. If your deal has a cap, your interest rate won't go above it, regardless of whether the base rate exceeds it, for the duration of the cap (which is usually two or five years).
Deals offering a cap tend to have higher initial rates, as you're paying for the security a cap offers.
Types of tracker mortgage
Tracker mortgages come in a few different flavours, mainly based on how long the rate tracks the Bank of England base rate.
Two year tracker
A two year tracker is the most common option. Your rate follows the base rate for two years, and once the deal ends you usually move onto your lender's standard variable rate (SVR). The SVR will usually be higher than the tracker rate, so at this point most people choose to remortgage.
Five year tracker
Five year trackers are less common, but they offer a longer stretch of base rate tracking before you're switched to your lender's SVR. They can feel steadier because you're not renegotiating every couple of years, but they do tie you into the gamble for longer.
Benefits of a tracker mortgage
Tracker mortgages come with some great advantages, especially if you're comfortable with a bit of movement in your monthly payments.
Potential for lower payments
Tracker rates are often lower than similar fixed rates when you first take them out. If the base rate falls during your deal, your payments fall too, without you having to do a thing (happy days). No remortgaging, no paperwork, no fees. It just happens automatically.
That said, it works in reverse too, so it's worth budgeting for the possibility of a rise rather than assuming rates will only move one way.
Understanding tracker mortgage rates in the UK
Tracker mortgage rates in the UK are linked to the Bank of England base rate. When the base rate changes, lenders adjust tracker rates almost immediately.
A few things to keep in mind:
• Your lender's percentage is fixed, the "+0.4%" part doesn't change
• The base rate can move several times a year, depending on all sorts of thingss
• Your payments can change monthly, although some lenders adjust every three months
Because the base rate is set by the Bank of England's Monetary Policy Committee, it reflects wider economic trends: inflation, employment, growth and global events. You don't need to be glued to the news to follow every detail, but it's helpful to keep an eye on rate announcements.
Current trends in tracker mortgage rates UK
Tracker mortgages have become more popular recently, especially among borrowers who think the base rate has peaked or will fall in the near future. When fixed rates are relatively high, trackers can look like a great choice because they offer the chance to benefit from future rate cuts straight away.
Comparison with fixed rate mortgages
Here's a simple way to weigh up your options:
Fixed-rate mortgage |
| Tracker mortgage | |
Payments | Stay the same |
| Can rise or fall |
Certainty | High |
| Lower |
Benefits if rates fall | No |
| Yes |
Risk if rates rise | No |
| Yes |
Early repayment charges | Often apply |
| Often lower or none |
What you need to think about with tracker mortgages
Before choosing a tracker, it's worth chatting through a few things with your mortgage adviser:
• Your budget – could you still afford your payments if the base rate rose by 1 to 2%?
• Your plans – are you likely to move, remortgage or overpay soon? Lifetime trackers can make this easier.
• Are you ok with a bit of risk – are you happy with some uncertainty, or do you prefer knowing exactly what you'll pay each month?
• The margin above base rate – a lower margin usually means a better deal, so it's worth comparing across lenders.
The one thing no adviser can answer is what the base rate will do over the next few years. They can make educated guesses, but no one has a crystal ball.
Is a tracker mortgage a good idea now?
It really depends on your situation and how comfortable you are with payments that can move. Trackers tend to appeal when people expect the base rate to fall, because you benefit from any reductions straight away. But if rates rise, your payments rise too, which is why trackers don’t look so great in uncertain times.
The real problem is that no one, including the experts, can say for sure where the base rate is heading. You can look at the current rate, recent trends and a few forecasts, but they're still just predictions. The base rate can move unexpectedly (it sat at 0.1% for two years during the pandemic, no one saw that coming).
Tracker mortgages offer transparency, flexibility and the potential for lower payments when rates fall. They're simple to understand and can suit borrowers who don't mind a bit of movement in their monthly costs. But they're not for everyone, if you prefer certainty or your budget is tight, a fixed rate is probably a safer bet.
A Mortgage Advice Bureau adviser can walk you through how different rate changes would affect your payments, and our mortgage repayment calculator shows the numbers instantly.
Ready to chat? Our advisers are ready to call you back today. The first chat costs nothing and is totally free of obligation.
Something to bear in mind...
FAQ
It depends on your lender's terms. Some update your payment almost straight after a base rate rise, while others wait until your next monthly payment cycle. The catch is that increases often hit your bill quickly, but decreases can be delayed until the next scheduled adjustment, so you may feel the rise before you enjoy the fall.
Most of the time, yes. Some lenders pair a very low tracker margin, say base + 0.25%, with a chunky arrangement fee. They'll often suggest adding the fee to your mortgage so you don't pay it upfront, but that means you'll pay interest on the fee for the whole term. Over 25 years, it can turn a cheap looking tracker into a much more expensive deal. Your mortgage adviser can show you the true long-term cost.