Last reviewed: June 2026
TL;DR- A tracker mortgage sets its interest rate at a fixed margin above the Bank of England base rate - for example, base rate plus 1%.
- When the base rate rises, the mortgage rate and monthly payment rise immediately. When it falls, payments fall.
- Tracker mortgages typically carry no early repayment charge during the tracker period, giving more flexibility than fixed rate products.
- The key risk is payment uncertainty if base rate rises significantly during the tracker period.
How a Tracker Mortgage Works
A tracker mortgage sets its interest rate as a fixed margin above an external reference rate - almost always the Bank of England base rate in the UK residential market. If the base rate is 4.25% and the tracker margin is 1%, the mortgage rate is 5.25%. If the base rate moves to 4%, the mortgage rate moves to 5% automatically, typically from the first day of the following month.
The margin above base rate is fixed for the tracker period and is set at the outset. Tracker periods are typically 2 or 5 years, after which the mortgage reverts to the lender's standard variable rate (SVR) unless the borrower remortgages. Some lenders offer lifetime trackers that track the base rate for the entire mortgage term.
Bank of England Base Rate and How It Moves
The Bank of England's Monetary Policy Committee (MPC) meets eight times per year to set the base rate. Decisions are published on the Bank of England website immediately after each meeting. The base rate is the primary tool through which the Bank of England seeks to meet its 2% inflation target as set by HM Treasury under the Bank of England Act 1998.
Base rate movements are not predictable with certainty. Between 2009 and 2022 the base rate was held between 0.1% and 0.75%. From August 2022 to August 2023, the MPC raised the rate from 0.1% to 5.25% in response to inflation. Subsequent decisions have adjusted the rate based on evolving economic conditions. Borrowers on tracker mortgages experienced rapid payment increases during this period.
Tracker vs Fixed Rate: Key Differences
A fixed rate mortgage locks in the interest rate for the initial period regardless of base rate movements, providing payment certainty. A tracker mortgage means payments move with the base rate, introducing uncertainty but also the potential for lower payments if base rates fall.
Tracker mortgages typically carry no early repayment charge (ERC) during the tracker period, unlike most fixed rate products. This means borrowers can remortgage or overpay without penalty, which provides flexibility that fixed rate products do not.
The relative value of a tracker versus a fixed rate depends on the trajectory of the base rate during the tracker period - which cannot be predicted with certainty at the outset. Borrowers who can absorb payment increases without financial stress may find trackers suitable; those who need payment certainty typically prefer fixed rates.
Collar and Cap Provisions
Some tracker mortgages include a collar - a minimum rate below which the mortgage rate will not fall even if the base rate falls further. Collars protect the lender's margin and limit the downside payment benefit for the borrower. Caps - maximum rates above which the mortgage rate will not rise - have been offered by some lenders in the past but are uncommon in the current market. Borrowers should check the product terms carefully for any collar or cap provisions before committing.
Standard Variable Rate vs Tracker
A standard variable rate (SVR) is also a variable rate but is set at the lender's discretion rather than tracking the base rate by a fixed margin. SVRs can move independently of base rate decisions and tend to be higher than tracker rates. Borrowers who do not remortgage at the end of a fixed or tracker deal revert to SVR automatically, which is typically not the most competitive rate available. SVRs are not the same as tracker mortgages even though both are variable.
Frequently Asked Questions
How quickly does a tracker mortgage payment change when the base rate moves?
Most tracker mortgage product terms state that rate changes take effect from the first day of the calendar month following the base rate change. Some lenders apply changes from the date of the MPC announcement. The product terms will specify the timing - borrowers should check these before committing.
Can I leave a tracker mortgage early without paying an early repayment charge?
Most tracker mortgages do not carry an early repayment charge during the tracker period, which is one of their key advantages over fixed rate products. However, this is not universal - some lenders do impose ERCs on tracker products. Borrowers should verify the product terms before assuming there is no ERC.
What happens at the end of a tracker period?
At the end of the tracker period, the mortgage reverts to the lender's standard variable rate (SVR) unless the borrower remortgages to a new product. SVRs are typically higher than tracker or fixed rate deal rates. Borrowers should begin reviewing remortgage options several months before the tracker period ends to avoid a period on SVR.
Is a lifetime tracker mortgage a good option?
A lifetime tracker tracks the base rate for the entire mortgage term with no initial deal period and no reversion to SVR. It provides transparency about how the rate is calculated and typically carries no ERC. The risk is full exposure to base rate movements for the duration of the mortgage. Whether this suits a borrower depends on their financial resilience and view of long-term rate movements - a question on which independent advice is recommended.
