What is a tracker mortgage?

Find out how a tracker mortgage works and how it compares with a fixed rate mortgage.

The full name of a tracker mortgage is a variable rate tracker mortgage. This is a type of mortgage where the interest rate you pay is linked to the Bank of England’s base rate.

The interest rate on a tracker mortgage changes with the Bank of England base rate, which affects how much your repayments will be each month.

This kind of mortgage is different from traditional fixed rate mortgages, which have set rates that stay the same throughout your deal.

With a tracker mortgage, repayments can go up or down regularly. If the Bank of England base rate is low, your mortgage repayment could be less as it won’t include as much interest. But if it rises, you might have to pay more each month.

How does a tracker mortgage work?

A tracker mortgage is linked to the Bank of England base rate. This can change up to eight times a year.

The interest rate you pay will be the Bank of England base rate plus a certain percentage. This will depend on the type of deal you choose.

Introductory rate

Usually applies from the first up to the fifth year of a mortgage deal.

Long-term rate

A deal you can choose which tracks the Bank of England rate for between ten years up to the whole of your mortgage term.

What does this mean for my monthly repayments?

When the Bank of England base rate falls, so does the interest you’ll pay on your mortgage. This means lower repayments each month, which could save you money and free up more of your budget.

On the other hand, if the base rate rises, your mortgage interest rate will too. This could mean your monthly payments go up. Plus, the extra money you pay would only cover the interest rate rise and wouldn’t clear more of your mortgage.

It’s also worth knowing that some tracker mortgage deals are equipped with what’s known as a ‘collar’. Lenders will add these to stop your repayments from going too low, even if the base rate drops below a certain percentage.


Can I overpay or repay my tracker mortgage?

You can, but it pays to give it some thought before doing so. If you’re still in your introductory period, you’ll likely have to pay an early repayment charge. This is also the case if you’re on a long-term tracker.

It’s best to check the terms and conditions with your mortgage provider before making any overpayments. 

Pros and cons of a tracker mortgage

Tracker mortgages can give you a cheaper rate than fixed deals. However, your repayments are ultimately at the mercy of the Bank of England base rate.

Here are the pros and cons of choosing a tracker mortgage.

Advantages of a tracker mortgage

  • When the base rate is going down, payments will be lower.
  • Introductory rates are often some of the cheapest mortgage deals available.
  • If a mortgage ‘collar’ is set at a low enough interest rate, base rate decreases will help you save more.

Disadvantages of a tracker mortgage

  • The base rate can change without warning meaning your payments can go up or down whenever this happens.
  • Introductory rates are usually only available for the first one to five years, after which you’ll pay a higher rate.
  • ‘Collars’ can restrict the additional savings you make if the base rate drops. Depending on how low a 'collar' is set, mortgage payment savings might be restricted if the base rate drops beneath this.

The content on this page is for reference and does not constitute financial advice. For impartial financial advice, we recommend government bodies like MoneyHelper.

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  • Find out how much you could borrow from Halifax
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  • Get an idea how a change to the Bank of England Base Rate could affect your monthly payments
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