Our Comprehensive Guide To Tracker Mortgages


Ignatius Uirab

Money Savings Advice guide to tracker mortgages

When you apply for a tracker mortgage, you can’t be sure what you’ll get. Though you might look ahead and make economic predictions, tracker mortgages are fairly unpredictable. If interest rates drop, you could end up getting a fantastic deal and enjoying a low rate for your mortgage.

What Is a Tracker Mortgage?

With a tracker mortgage, your monthly payments will fluctuate. Your interest rate will rise and fall, influenced by several factors, which could work in your favour or mean that you’re charged more over the course of your mortgage term.

If interest rates rise, your tracker mortgage could leave you feeling disappointed.

Read on to learn more about tracker mortgages and why you might choose one for your property.

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What Is A Tracker Mortgage?

Put simply; a tracker mortgage is one that tracks interest rate changes. It’s not set at the Bank of England Base Rate, though will follow the same fluctuating pattern. If the Base Rate goes up, so will your interest rate. If it drops, so will your monthly payment.

With a tracker mortgage, your monthly payment is likely to go up and down. You won’t know how much you’ll pay from one month to the next. A tracker mortgage can make it hard to budget, adding risk to your monthly mortgage payments.

Who Are Tracker Mortgages For?

Many people don’t like the risk that comes with a tracker mortgage. These people might choose a fixed-rate mortgage, with fixed interest rates that lead to complete predictability. With a fixed-rate mortgage, monthly payments will always stay the same.

If you can afford to take a bit of a risk, a tracker mortgage might work in your favour. They often work out a little cheaper, and at their best can save you a lot of money. Of course, you could just as easily get hit by high interest rates that will make your monthly payments more expensive.

Tracker mortgages aren’t right for everyone. If you’re on a tight budget and need to know what’s coming, these aren’t the best mortgages for you. If you want to take a chance, or would like the reassurance that your interest rate will change with the economy, you may be the ideal candidate for buying a property with a tracker mortgage.

Benefits Of Tracker Mortgages

Tracker mortgages rise and fall in line with the economy. When the Bank of England Base Rate goes up, so will the amount that you’re paying. When it drops, your mortgage repayments fall with it.

With some types of variable mortgage, the lender can make changes according to their commercial interests. Rates can rise and fall not just in line with the Bank of England Base Rate, but also in line with business actions and decisions. With a tracker mortgage, this isn’t the case.

Tracker mortgages only change when influenced by the economy, so these types of mortgages can offer reassurance to those that might not fully trust their lender.

Drawbacks Of Tracker Mortgages

Tracker mortgages are fairly unpredictable. Though most people could take a guess at which way the economy’s going, there’s always a chance that things will change and you’ll end up with very different interest rates. Once you’re locked into your tracker mortgage, you can’t move elsewhere if you regret it.

The charges for breaking an agreement early will often outweigh the benefits of moving somewhere else. If you’re not prepared for the financial risk, a tracker mortgage isn’t right for you.

Length Of Tracker Mortgages

Most tracker mortgages last for a couple of years. Once you’ve reached the end of your mortgage term, you’ll typically be moved onto a lender’s standard variable rate. A standard variable rate (SVR) mortgage is usually fairly expensive, so it’s in your best interests to keep track of your mortgage and move once your tracker term’s finished.

If you plan to move to a different mortgage, watch out for an early repayment charge. These charges can be quite high, negating any benefits of finding a cheaper deal elsewhere.

Some lenders offer lifetime trackers, so your mortgage will track the Bank of England base rate for as long as you’re borrowing money.

Tracker Mortgage Small Print

A tracker mortgage should only follow changes to the Bank of England Base Rate. It shouldn’t change according to any other outside influence, nor should it be adjusted by your mortgage lender to suit their economic interests.

When you’re choosing a mortgage, check the small print to make sure that yours is really a tracker. Some mortgages are described as tracker mortgages, but with the small print to tell you that they’re tracking an entirely different rate. Some mortgage providers will advertise a tracker that’s specifically tracking their own rates.

How Often Does The Base Rate Change?

The Bank of England Base Rate can change up to eight times a year. For you, this could mean almost monthly adjustments to your payments. It’s unusual for the Base Rate to change so often, but isn’t completely unheard of. Could you afford eight increases a year, if that’s the way things turned out?

Here are the last 15 base rate changes. This demonstrates how the changes aren’t anywhere near that frequent in recent years, but they have changed often in the past.

Date Time since the last change New base rate
10th March 2020 8 Days 0.1%
11th March 2020 588 Days 0.25%
2nd August 2018 274 Days 0.75%
2nd November 2017 456 Days 0.5%
4th August 2016 2710 Days 0.25%
5th March 2009 29 Days 0.5%
5th February 2009 29 Days 1%
8th January 2009 36 Days 1.5%
4th December 2008 29 Days 2%
6th November 2008 30 Days 3%
8th October 2008 182 Days 4.5%
10th April 2008 64 Days 5%
7th February 2008 64 Days 5.25%
6th December 2007 155 Days 5.5%
5th July 2007 57 Days 5.75%

Source: Compiled by Money Savings Advice from Bank of England

Tracker Mortgage Collars

Usually, as the Base Rate falls, your mortgage interest rate will fall with it. To get the best price, you might need to agree to a ‘collar’ for your mortgage rate. A collar is a minimum limit, designed to make sure that the lender doesn’t lose too much money. If the Base Rate drops particularly low, your interest rate might not fall as far. Once your interest rate reaches its lower limit, it won’t be allowed to drop further.

When you’re applying for a tracker mortgage, check if there’s a collar in place. Are you happy to accept that your mortgage interest will never drop below this amount?

Not setting a collar is riskier for a lender, so they’re likely to set the entire tracker mortgage at a slightly higher level.

Tracker Mortgage Caps

The opposite of a collar, a cap defines the maximum interest you’ll be charged. This can help to provide some security if you’re worried about rising prices, though you’ll usually pay more for a tracker mortgage that offers a maximum cap.

Finding The Best Tracker Mortgage

It’s relatively easy to compare each different tracker mortgage. At the same time, all prices should rise and fall in line with the Base Rate. If you’re comparing trackers, the current prices of each should show you which will be the cheapest.

Look out for caps that could offer reassurance, and collars that could stop you from taking advantage of the lowest interest rates. Also check the small print, to make sure that you’re dealing with a genuine and true tracker mortgage.

Once you’ve got your tracker mortgage, be sure not to get too complacent. Once your tracker term runs out, you could be moved onto a costly standard variable rate.

How Can Money Savings Advice Help You With A Mortgage?

Here at Money Savings Advice, we have partnered with some of the UK’s leading mortgage brokers. They have already helped thousands of people get the best mortgage deal and they can do the same for you.

Choosing an independent adviser means they won’t recommend a mortgage unless they are sure it is in your best interests. Their advice is also regulated by the FCA, which gives you an additional layer of protection.

If you would like to speak to one of these brokers who can provide you with a ‘whole market quote’ then click on the below and answer the very simple questions.


Ignatius Uirab

Ignatius is one of our leading financial specialists. With over eight years of financial experience, he has vast experience and knowledge of the financial sector. When he is not writing about how to make your money go further, he is a true family man.

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