What is a Fixed Rate Mortgage?
A fixed rate mortgage locks your interest rate for a set period — typically 2, 3, 5 or 10 years. During this period your monthly payment stays exactly the same, regardless of what happens to the Bank of England base rate or wider financial markets.
At the end of the fixed period, your mortgage reverts to the lender's Standard Variable Rate (SVR), which is almost always higher. Most borrowers remortgage to a new deal before this happens.
Fixed rates are currently the most popular choice in the UK, accounting for around 75–80% of new mortgages. They suit borrowers who value certainty and want to budget precisely.
What is a Tracker Mortgage?
A tracker mortgage follows an external interest rate — almost always the Bank of England base rate — plus a set margin. For example, a tracker at "base rate + 0.75%" would currently sit at around 5.0% (if base rate is 4.25%).
Unlike a fixed rate, your monthly payment changes whenever the base rate moves. If the base rate falls, you pay less. If it rises, you pay more.
Trackers typically have no early repayment charges, giving you the flexibility to overpay or switch deals without penalty — an advantage if rates fall significantly.
Fixed vs Tracker: Key Differences
Certainty: Fixed rates offer a guaranteed monthly payment. Tracker payments change with the base rate — for better or worse.
Flexibility: Most trackers allow unlimited overpayments and carry no early repayment charges. Fixed rate deals almost always have ERCs during the fixed period.
Initial rate: In a normal market, trackers tend to offer slightly lower initial rates than equivalent fixed deals. In the current environment (2025), the difference is modest.
Risk: Fixed rates protect you from rate rises. Trackers expose you to rises but let you benefit from falls.
Which is Better in 2025?
The Bank of England base rate peaked at 5.25% in mid-2023 and has been gradually reduced since. As of mid-2025, it sits around 4.25%, with markets pricing in further gradual cuts over the next 12–24 months.
In a falling rate environment, trackers look attractive — your payments should reduce automatically as the base rate falls. However, if cuts are slower or smaller than expected, a short-term fixed rate (2 years) offers protection while keeping your options open.
For most borrowers, a 2-year fixed rate currently offers a reasonable balance: competitive pricing, payment certainty, and a relatively short commitment before you can review your deal.
If you plan to move home, pay off the mortgage, or have income uncertainty, a tracker with no early repayment charges may be better for its flexibility.
How to Decide
Ask yourself these questions:
1. Can I absorb higher monthly payments if rates rise? If no, fix. 2. Do I plan to move or pay off my mortgage within 2 years? If yes, consider a tracker to avoid ERCs. 3. Do I want the security of knowing exactly what I'll pay each month? If yes, fix. 4. Am I comfortable with some payment uncertainty in exchange for potentially lower costs? If yes, consider a tracker.
Always speak to an FCA-regulated mortgage broker before deciding. They can compare deals across the whole market and factor in your specific circumstances, income, and plans.