Fixed vs Tracker Mortgage UK 2026 — Which Should You Choose?

Fixed Rate Mortgages Explained

A fixed rate mortgage locks your interest rate — and therefore your monthly payment — for a defined period, regardless of what happens to interest rates in the wider economy. During the fixed term, your payment is entirely predictable, making budgeting straightforward and protecting you from any rate increases. When the fixed term ends, you typically move to the lender's Standard Variable Rate (SVR) unless you remortgage to a new deal.

2-Year Fixed Rate

The most popular mortgage product in the UK. A 2-year fix provides short-term certainty with the flexibility to remortgage relatively quickly as your circumstances change. The trade-off is more frequent remortgaging costs and uncertainty about what rates will look like at the end of the term. In periods of falling rates, a 2-year fix allows you to capture lower rates sooner. In rising rate environments, you are exposed to higher rates at renewal after just two years. The 2-year fix typically carries a slightly higher rate than its 5-year equivalent.

5-Year Fixed Rate

The second most popular product, and increasingly the default choice for borrowers seeking stability. Five-year fixes provide half a decade of payment certainty, reducing the frequency of remortgaging and offering better protection against medium-term rate rises. In 2026, 5-year fixed rates are typically priced comparably to or occasionally below 2-year rates, making them particularly attractive on a cost basis. The limitation is a longer Early Repayment Charge (ERC) window — if you need to exit the mortgage during years 1-5, the penalty can be substantial.

3-Year Fixed Rate

Less common than 2 and 5-year products, 3-year fixes occupy a middle ground. They offer slightly more stability than a 2-year fix without the long commitment of a 5-year term. However, fewer lenders offer competitive 3-year products, meaning the choice is narrower. They can suit borrowers who know they will want to remortgage or move in around 3 years.

10-Year Fixed Rate

For borrowers who value maximum certainty above all else, 10-year fixes lock in a rate for a decade. The appeal is obvious — you know exactly what you will pay for ten years. The drawback is a 10-year ERC window, which is substantial. If rates fall significantly during that period, you are locked into a higher rate with a large penalty for leaving. Ten-year fixes suit borrowers who are completely settled in their home, have no plans to move or significantly change their mortgage, and are prepared to pay a premium for long-term certainty.

Tracker Mortgages Explained

A tracker mortgage has an interest rate that moves in direct response to a reference rate — almost always the Bank of England (BoE) base rate. The tracker rate is expressed as a margin above the base rate: for example, "base rate + 1.0%". If the base rate is 4.5%, your tracker rate is 5.5%. When the BoE raises or cuts rates, your tracker rate — and therefore your monthly payment — changes by the exact same amount, usually taking effect from the following month.

How the Tracking Margin Works

The margin above the base rate is fixed for the life of the tracker deal, even though the total rate moves. A tracker at "base rate + 0.5%" with a base rate of 4.75% gives you a total rate of 5.25%. If the base rate falls to 4.0%, your rate becomes 4.5%. If it rises to 5.5%, your rate becomes 6.0%. The margin remains constant throughout — only the base rate element fluctuates. This direct linkage is what distinguishes a tracker from a Standard Variable Rate, which lenders can change at their discretion without following the BoE exactly.

Lifetime Trackers

Some tracker products track the base rate for the entire mortgage term rather than a fixed initial period. Lifetime trackers are relatively rare in the 2026 market but offer perpetual flexibility — most come with no early repayment charges at all, meaning you can switch to a fixed rate or pay off the mortgage at any time without penalty. The margin on a lifetime tracker is typically higher than on a short-term tracker, but the flexibility can be extremely valuable for borrowers who may need to sell or remortgage at short notice.

Collars and Caps

Some tracker mortgages include a floor rate (collar) below which your rate cannot fall, even if the base rate drops significantly. For example, a tracker might have a collar at 0%, meaning even if the base rate went negative (as has happened in some European markets), your rate would not fall below the collar. In practice, collars at very low rates do not affect most borrowers today, but it is worth checking your mortgage terms. Caps work in the opposite direction — a maximum rate above which your tracker cannot go — offering some protection against extreme rate rises.

Bank of England Base Rate Context and 2026 Outlook

Understanding the current interest rate environment is essential context for the fixed vs tracker decision. The Bank of England raised its base rate aggressively from 0.1% in late 2021 to 5.25% in August 2023 in response to surging inflation. As inflation returned towards the 2% target, the BoE began cutting rates, with the base rate standing at approximately 4.5% as of early 2026.

Market expectations in early 2026 suggest further gradual rate cuts over the next 12 to 24 months, with the base rate potentially reaching 3.5-4.0% by late 2026 or 2027, though this is uncertain and subject to economic conditions. Inflation data, GDP growth, and global economic factors will all influence the pace and extent of any cuts. The BoE has emphasised a cautious, data-dependent approach — rapid rate cuts are not guaranteed.

Side-by-Side Comparison

Real Example: £250,000 Mortgage, 25 Years

To make the comparison concrete, here is a worked example using a £250,000 repayment mortgage with a 25-year term. We compare a 5-year fixed rate at 4.50% with a tracker at base rate + 0.75% (total 5.25% at current base rate of 4.50%), modelling three scenarios for how the base rate might move over five years.

Use our mortgage calculator to run your own scenarios with your specific loan amount and rate assumptions. The above figures are illustrative and rounded — actual monthly payments will vary based on the precise loan balance, amortisation, and when rate changes occur.

The key insight from these scenarios is that no product is universally better — the outcome depends on what happens to rates. The fixed rate is the risk-management choice: you know exactly where you stand regardless of economic events. The tracker is the speculative choice: you benefit if rates fall but pay more if they stay flat or rise. Neither is inherently superior — it is a function of your personal risk tolerance and financial resilience.

When a Fixed Rate Mortgage Is the Better Choice

A fixed rate mortgage is generally the right choice in the following circumstances:

• Rising rate environment: If rates are rising or you believe they will rise, fixing locks in the current rate and prevents your payments increasing.
• Tight budget or fixed income: If you have little financial headroom and a payment increase would cause genuine hardship, the certainty of a fixed rate is invaluable. You can budget confidently knowing the mortgage payment will not change.
• Long-term plans in the property: If you plan to stay in the same home for the entire fix period, a 5-year fix avoids the disruption and cost of frequent remortgaging.
• Peace of mind priority: Some borrowers find the uncertainty of a tracker stressful, even if they could financially absorb rate rises. If knowing your exact payment every month matters to you, fixed is the appropriate choice.
• Family budgeting: With children, school fees, or other fixed family commitments, mortgage payment predictability reduces overall financial planning complexity.

When a Tracker Mortgage Is the Better Choice

A tracker mortgage makes more sense in these circumstances:

• Falling rate environment: When the BoE is in a rate-cutting cycle (as has been the case since late 2024), trackers automatically benefit as payments reduce without any need to remortgage.
• Short-term ownership plans: If you expect to sell within 2-3 years, a tracker with no ERC avoids locking yourself into a fixed rate with penalties for early exit.
• No Early Repayment Charge needed: Flexibility to overpay, partially repay, or exit without penalty is only possible on a tracker (or SVR). Fixed rates restrict this unless the product includes an overpayment allowance (most allow 10% per year).
• Comfortable with payment variation: If you have sufficient financial reserves to absorb a rate rise of 1-2% without hardship, the potential savings from a tracker in a falling rate environment may outweigh the risk.
• Expecting a windfall or inheritance: If you may want to make a large lump-sum repayment in the near future, a tracker with no ERC allows you to do so at any time without penalty.

Variable Rate Mortgages vs Tracker Mortgages

These two terms are often confused, but they are meaningfully different. A tracker mortgage is a type of variable rate mortgage — specifically, one that tracks a published reference rate (the base rate) with a defined margin. The variability is entirely mechanical and transparent.

A Standard Variable Rate (SVR) mortgage is also variable, but the rate is set by the lender at their discretion. The lender can change their SVR at any time, by any amount, regardless of what the Bank of England does. They will generally follow BoE movements, but they are under no obligation to pass on rate cuts in full, and they can raise their SVR even when the BoE has not moved. This makes SVRs inherently less transparent and potentially less favourable than trackers for borrowers.

Standard Variable Rate — Why You Should Never Stay on It

The SVR is the rate your mortgage automatically reverts to when your initial deal — whether fixed or tracker — expires. It is almost always significantly higher than any competitive product available in the market. SVRs across major UK lenders in 2026 range from approximately 6.5% to 8.5%, compared to competitive fixed rates of around 4.0-5.0% and trackers at base rate + 0.5-1.0%.

No borrower should remain on the SVR longer than the time needed to arrange a new deal. The only exception is if you intend to pay off the mortgage entirely within a very short period and the absence of an ERC makes the SVR preferable to a fixed product. In virtually all other cases, remaining on the SVR is an expensive choice made through inaction rather than strategy.

Discount Mortgages Explained

A discount mortgage offers a rate that is a set percentage below the lender's SVR — for example, SVR minus 1.5%. Unlike a tracker, the reference rate is the lender's own SVR rather than the Bank of England base rate. This means changes in your payment depend on changes to the lender's SVR, which they control. Discount mortgages are less common and less transparent than tracker products, and they tend to be offered by smaller building societies. For most borrowers, a tracker with a direct link to the base rate is preferable to a discount from an SVR that the lender can move independently.

How to Decide: Questions to Ask Yourself

Use these questions to guide your decision between fixed and tracker:

• How tight is my monthly budget? Could I absorb a £200-300 increase in payments without hardship?
• Do I plan to stay in this property for the full deal period, or might I sell or remortgage early?
• Do I need the flexibility to make large overpayments without penalty?
• How do I feel about uncertainty? Am I willing to monitor rate news, or do I want to set and forget?
• What is my view on the direction of interest rates over the next 2-5 years?
• Is the current gap between fixed and tracker rates large enough to compensate for the additional risk of a tracker?
• Am I near the end of my mortgage term, where overpayments and flexibility matter more?
• Do I have dependants or fixed financial commitments that make payment predictability essential?

Frequently Asked Questions