UK Mortgage Types: Fixed, Variable, Tracker, Discount

UK residential mortgages come in four main rate flavours: fixed, tracker, standard variable, and discount. Each prices the borrower's interest payments differently and behaves differently when the Bank of England changes Bank Rate. The choice depends on the borrower's risk tolerance, expected length of stay, and view on where rates are headed.

Fixed-rate mortgages

A fixed rate locks the monthly payment for a defined deal period, typically 2, 3, 5 or 10 years. Predictability is the main benefit. The trade-off is that early repayment charges typically apply during the deal period, and the rate may be higher than a tracker would be in a falling-rate environment. After the deal period, the mortgage typically reverts to the lender's SVR.

Tracker mortgages

Tracker mortgages set the rate as Bank Rate plus a fixed margin (for example, Bank Rate plus 0.99%). When the Monetary Policy Committee changes Bank Rate, the tracker rate moves correspondingly. Some trackers have a floor or collar that prevents the rate falling below a defined level. Lifetime trackers run to the end of the mortgage; term trackers run for a deal period only.

Standard variable rate

SVR is the lender's default rate, set by the lender and typically higher than the deal rates available. Many borrowers end up on SVR by default at the end of their fixed or tracker deal period; remortgaging or asking the lender for a product transfer typically produces a better rate.

Discount mortgages

Discount mortgages offer a discount off the lender's SVR for a defined period. Because SVR moves at the lender's discretion, discount rates can move even when Bank Rate is unchanged. Discount products are less common than fixed or tracker in the current market.

Choosing between them

The choice depends on three factors: appetite for payment uncertainty, expected length of stay in the deal, and view on the path of Bank Rate. Borrowers with tight monthly budgets often favour fixed for the certainty. Borrowers expecting to move soon often favour trackers without early repayment charges for the flexibility.

How fixed-rate pricing works

Fixed-rate mortgage pricing is driven by swap rates: the rate at which banks lend to each other for the relevant period. A 5-year fixed mortgage is priced off the 5-year swap rate plus the lender's margin and product fee. When markets price in expectations of rising or falling Bank Rate, swap rates adjust accordingly, which is why fixed mortgage rates can move before any Bank Rate change.

The 'gilt yield' (UK government bond yield) is closely correlated with swap rates and is the most-watched proxy for fixed mortgage pricing direction. Sharp gilt yield moves (such as around the September 2022 mini-budget) feed through to mortgage rates within days. The Bank of England publishes daily gilt yields; comparing the 5-year gilt yield to current 5-year fixed mortgage rates shows the typical lender margin.

Choosing the fixed term length involves trade-offs. Shorter fixes (2 years) typically have lower rates but require remortgage sooner with associated arrangement fees and potential rate changes. Longer fixes (5 or 10 years) lock in certainty but may carry higher rates and ERCs that limit flexibility if circumstances change. The break-even comparison considers the rate difference, expected ERCs on early exit, and the household's likelihood of needing to move.

Tracker mortgage mechanics in detail

A tracker rate is expressed as Bank Rate plus a margin (e.g. Bank Rate + 0.99%). The margin is fixed for the deal period; only Bank Rate movements affect the actual rate paid. If Bank Rate is 4.5% and the margin is 0.99%, the borrower pays 5.49%. A Bank Rate increase to 5% would move the tracker rate to 5.99%; a cut to 4% would move it to 4.99%.

Most trackers have a floor or 'collar' that prevents the rate falling below a defined level (often the margin itself, meaning the rate cannot fall below the lender's profit margin). Some lifetime trackers from before the 2008 financial crisis had no floor; these famously fell to very low rates after Bank Rate was cut to near zero and remain valuable for those who hold them.

Lifetime trackers run to the end of the mortgage; term trackers run for a deal period only. Term trackers typically have ERCs during the deal period; lifetime trackers typically do not, providing maximum flexibility. The trade-off is that lifetime tracker rates are often higher than term tracker rates at outset.

SVR and the post-deal experience

At the end of any fixed, tracker, or discount deal period, the mortgage typically reverts to the lender's SVR unless the borrower switches to a new product. SVR is typically materially higher than deal rates: a lender may offer 4.5% on a 5-year fixed deal but charge 8% SVR after the deal ends. Reverting to SVR without remortgaging or product transferring can therefore produce a substantial monthly payment increase.

SVR is set at the lender's discretion. Lenders typically (but not always) raise SVR after Bank Rate rises and (sometimes) lower SVR after Bank Rate cuts. The actual relationship is loose; some lenders maintain SVR at a level reflecting their cost of funds rather than tracking Bank Rate. Borrowers should not rely on SVR being competitive.

The common pattern is to remortgage or product transfer at the end of each deal period, treating SVR as a fallback rather than a destination. Most lenders allow new deals to be agreed 3 to 6 months before the existing deal ends, locking in the rate while still leaving time to switch if rates improve.

Discount, capped, and combination products

Discount mortgages offer a fixed discount off the lender's SVR for a defined period (e.g. SVR - 2% for 3 years). Because SVR moves at the lender's discretion, discount rates can move even when Bank Rate is unchanged. The lender effectively retains control of the rate trajectory. Discount products are less common than fixed or tracker in the current market because of this borrower uncertainty.

Capped trackers combine a tracker with a maximum rate ceiling. The borrower benefits from rate falls but has protection if rates rise above the cap. The cap is typically priced at a premium versus standard trackers. Capped trackers are uncommon in the current market.

Offset and current account mortgages combine any of the basic rate types with the offset feature: linked savings reduce the interest charged on the mortgage balance. These structures are covered in detail in the offset mortgage article. Family offset (where a family member's savings offset the borrower's mortgage) is a niche structure available from a small number of lenders.

Decision framework for rate type

Three questions help frame the rate type decision. First, what is the household's tolerance for payment uncertainty? Tight monthly budgets generally favour fixed rates for the certainty; households with cash buffer and rate-fall optimism can tolerate tracker variability. Second, what is the expected length of stay in the property? Short stays favour shorter fixes or trackers without ERCs; long stays favour longer fixes for longer certainty.

Third, what is the household's view on future rate moves? Borrowers expecting rate cuts often prefer trackers or short fixes to benefit from falls; borrowers expecting rate rises often prefer longer fixes to lock in current rates. Honest acknowledgement that rate forecasting is uncertain (even by experts) often pushes households toward the certainty option regardless of view.

A common approach for first-time buyers is a 5-year fixed at typical purchase, providing certainty through the early years of ownership when other financial pressures (settling in, possible children) are highest. A 2-year fixed offers more flexibility if circumstances may change quickly. Trackers suit borrowers with strong rate views or short expected stays.

Rate environment and product mix in 2026

The UK mortgage rate environment shifted materially in late 2022 and 2023 following the September 2022 mini-budget and the Bank of England's response. Bank Rate rose from 0.10% in December 2021 to a peak of 5.25% in August 2023, before settling into a downward trajectory through 2024 and 2025. By 2026, Bank Rate has continued to ease; the specific level depends on inflation data and the Monetary Policy Committee's path.

This rate environment has affected product mix preferences. Fixed-rate products remain dominant for new mortgages but the typical fix length has shifted. 5-year fixes were popular during the lower-rate environment because of the certainty premium; 2-year fixes have become more common where rates are expected to fall, allowing the borrower to remortgage to lower rates sooner.

Tracker mortgages have re-entered the mainstream conversation. With expectations of further Bank Rate cuts, trackers offer the potential to capture future falls. The trade-off is uncertainty if cuts don't materialise. Lifetime trackers without early repayment charges provide maximum flexibility.

Worked example: a borrower with a GBP 250,000 mortgage choosing between a 2-year fixed at 4.5% and a tracker at Bank Rate + 0.85% (currently 4.75% if Bank Rate is 3.90%). Monthly payments at 4.5% are around GBP 1,389; at 4.75% are around GBP 1,427. Difference of around GBP 38 per month or GBP 912 over 2 years. If Bank Rate falls 0.5% during the period (to 3.40%), the tracker rate falls to 4.25% and the borrower benefits. If Bank Rate rises 0.5%, the tracker rate rises to 5.25% and the borrower is worse off.

The practical takeaway: the choice depends on the borrower's view of future rates and tolerance for uncertainty; for households with tight monthly budgets, fixed rates provide payment certainty even at a small premium.

Mortgage product selection framework

A practical framework for product selection considers four key factors. First, the borrower's payment certainty preference: tight monthly budgets favour fixed rates; flexible budgets can tolerate tracker variability. Second, the expected length of stay: planned moves within 2 years suit short fixes or trackers without ERCs; long-term stays suit longer fixes.

Third, the borrower's view on future rate moves: rate-fall expectations favour trackers; rate-rise expectations favour fixes. Fourth, the relative pricing in the current market: when fixed rates are below tracker rates, fixed often wins; when trackers are materially lower, the choice depends on conviction about future rates.

For most first-time buyers, 5-year fixed rates provide certainty through the early years of ownership when other financial pressures are highest. For experienced borrowers with strong rate views, trackers or short fixes can be appropriate.

Discount mortgages and their decline in popularity

Discount mortgages (which offer a discount off the lender's SVR for a defined period) are less common in the current market than fixed or tracker products. The lender's discretion over SVR makes the rate trajectory unpredictable; borrowers prefer the certainty of fixed rates or the Bank Rate-linked predictability of trackers. Some specialist lenders still offer discount products in specific situations.

Reverting to SVR at deal end and what it means

At the end of any fixed, tracker, or discount deal period, the mortgage typically reverts to the lender's SVR unless the borrower switches. SVR is typically materially higher than available deal rates; falling onto SVR for even a short period can substantially increase the monthly payment. Planning the remortgage 3 to 6 months before deal end captures the saving.

Disclaimer

This article provides general information based on rules and figures published by UK government and regulator sources as of May 2026. It is not personal financial, legal, immigration or tax advice. Rules, fees and figures change and individual circumstances vary. Readers should check primary sources or consult a qualified, regulated adviser before acting on any information here.

Frequently asked questions

What happens at the end of the deal period?

The mortgage typically reverts to the lender's SVR unless the borrower switches to a new product (a product transfer with the existing lender) or remortgages to a different lender. Most borrowers should plan to switch rather than revert because SVR is typically materially higher than available deal rates. Lenders typically allow new product offers 3 to 6 months before the existing deal ends, providing time to compare options and complete the switch without falling onto SVR.

Are tracker mortgages always cheaper than fixed?

No. Tracker pricing can be above or below fixed pricing depending on the rate environment and market expectations. When markets expect rates to fall, fixed rates can be lower than trackers (because the fix reflects the expected average over the term). When markets expect rates to rise, trackers can be lower at outset but rise above fixed rates within the deal period. The decision is therefore more about payment certainty than expected total cost, because the expected total cost is similar across products under efficient pricing.

Can a fixed-rate mortgage be repaid early?

Yes, but early repayment charges typically apply during the deal period. Most products allow up to 10% of the balance per year to be overpaid without charge; amounts above this attract the ERC, typically a percentage of the excess that declines through the deal period. ERCs can be substantial: 5% on a GBP 250,000 mortgage is GBP 12,500. The product offer document sets out the ERC schedule. Some lifetime trackers and term variable products have no ERCs, providing flexibility but typically at higher headline rates.

Does the discount on a discount mortgage stay fixed?

The discount margin stays fixed, but the SVR it is discounted from can change at the lender's discretion, so the actual rate paid can move. This is a key difference from tracker products where the underlying reference rate (Bank Rate) is set by an independent body. With discount products, the lender effectively controls the rate trajectory by setting SVR; the borrower has no protection against the lender raising SVR independently of Bank Rate.

Are interest-only and offset mortgages separate types?

Yes. Interest-only and offset are structural features that combine with any of the four rate types covered above. A borrower can have a 5-year fixed interest-only mortgage, a tracker offset mortgage, or various other combinations. Both are covered in separate leaf articles in this hub. The choice of rate type (fixed, tracker, etc.) is independent of the structural choice (repayment vs interest-only, offset or not).

Should the deal length match the planned stay in the property?

Often yes, particularly to avoid ERCs on early exit. A 2-year fixed for a borrower planning to move in 18 months provides certainty without ERC risk; a 5-year fixed for the same borrower would mean either paying ERCs on the move or porting the mortgage to the new property (which requires the new property to meet lender criteria). Portability provides some flexibility but is not guaranteed in all circumstances.

How does inflation affect mortgage decisions?

High inflation typically leads to higher Bank Rate, which raises tracker rates directly and pushes fixed rates higher as swap rates rise. Borrowers locking in fixed rates during high-inflation periods are protected if rates continue rising but pay a premium if rates subsequently fall. The Office for National Statistics publishes monthly CPI data; persistent inflation above the Bank of England's 2% target typically signals rising Bank Rate.

Frequently asked questions

What happens at the end of the deal period?

The mortgage typically reverts to the lender's SVR unless the borrower switches to a new product (a product transfer with the existing lender) or remortgages to a different lender. Most borrowers should plan to switch rather than revert because SVR is typically materially higher than available deal rates. Lenders typically allow new product offers 3 to 6 months before the existing deal ends, providing time to compare options and complete the switch without falling onto SVR.

Are tracker mortgages always cheaper than fixed?

No. Tracker pricing can be above or below fixed pricing depending on the rate environment and market expectations. When markets expect rates to fall, fixed rates can be lower than trackers (because the fix reflects the expected average over the term). When markets expect rates to rise, trackers can be lower at outset but rise above fixed rates within the deal period. The decision is therefore more about payment certainty than expected total cost, because the expected total cost is similar across products under efficient pricing.

Can a fixed-rate mortgage be repaid early?

Yes, but early repayment charges typically apply during the deal period. Most products allow up to 10% of the balance per year to be overpaid without charge; amounts above this attract the ERC, typically a percentage of the excess that declines through the deal period. ERCs can be substantial: 5% on a GBP 250,000 mortgage is GBP 12,500. The product offer document sets out the ERC schedule. Some lifetime trackers and term variable products have no ERCs, providing flexibility but typically at higher headline rates.

Does the discount on a discount mortgage stay fixed?

The discount margin stays fixed, but the SVR it is discounted from can change at the lender's discretion, so the actual rate paid can move. This is a key difference from tracker products where the underlying reference rate (Bank Rate) is set by an independent body. With discount products, the lender effectively controls the rate trajectory by setting SVR; the borrower has no protection against the lender raising SVR independently of Bank Rate.

Are interest-only and offset mortgages separate types?

Yes. Interest-only and offset are structural features that combine with any of the four rate types covered above. A borrower can have a 5-year fixed interest-only mortgage, a tracker offset mortgage, or various other combinations. Both are covered in separate leaf articles in this hub. The choice of rate type (fixed, tracker, etc.) is independent of the structural choice (repayment vs interest-only, offset or not).

Should the deal length match the planned stay in the property?

Often yes, particularly to avoid ERCs on early exit. A 2-year fixed for a borrower planning to move in 18 months provides certainty without ERC risk; a 5-year fixed for the same borrower would mean either paying ERCs on the move or porting the mortgage to the new property (which requires the new property to meet lender criteria). Portability provides some flexibility but is not guaranteed in all circumstances.

How does inflation affect mortgage decisions?

High inflation typically leads to higher Bank Rate, which raises tracker rates directly and pushes fixed rates higher as swap rates rise. Borrowers locking in fixed rates during high-inflation periods are protected if rates continue rising but pay a premium if rates subsequently fall. The Office for National Statistics publishes monthly CPI data; persistent inflation above the Bank of England's 2% target typically signals rising Bank Rate.