With a tracker mortgage, your interest rate ‘tracks’ the BoE base rate. That means if the base rate drops, the interest rate you’re paying drops and your monthly repayments will reduce. If the base rate goes up, your monthly repayments will rise to cover the increase in interest.
Tracker mortgages don’t match the base rate exactly. They’re usually set at a rate just above the base rate and can vary depending on your loan to value (LTV).
Visit our mortgage rates page for more information.
The base rate is set by the BoE Monetary Policy Committee. It’s the official borrowing rate for banks and building societies in the UK and influences the rates they offer customers. It’s reviewed throughout the year and can fluctuate.
Explore: Why do interest rates change?
| Advantages | Disadvantages |
|---|---|
| Your interest rate and monthly repayment could fall in line with the base rate. | The base rate could rise, so your interest rate and your monthly repayments could increase. |
| If the base rate drops and your monthly repayments reduce, you could use it as an opportunity to make overpayments on your mortgage or add to your savings. | Uncertainty over whether the base rate will rise or fall which could make budgeting and future planning harder. |
| Some tracker mortgages have more flexibility when switching to a new deal. | You may still need to pay an early repayment charge when switching to a new mortgage deal. |
| Advantages | Your interest rate and monthly repayment could fall in line with the base rate. | Your interest rate and monthly repayment could fall in line with the base rate. |
|---|---|---|
| Disadvantages | The base rate could rise, so your interest rate and your monthly repayments could increase. | The base rate could rise, so your interest rate and your monthly repayments could increase. |
| Advantages | If the base rate drops and your monthly repayments reduce, you could use it as an opportunity to make overpayments on your mortgage or add to your savings. | If the base rate drops and your monthly repayments reduce, you could use it as an opportunity to make overpayments on your mortgage or add to your savings. |
| Disadvantages | Uncertainty over whether the base rate will rise or fall which could make budgeting and future planning harder. | Uncertainty over whether the base rate will rise or fall which could make budgeting and future planning harder. |
| Advantages | Some tracker mortgages have more flexibility when switching to a new deal. | Some tracker mortgages have more flexibility when switching to a new deal. |
| Disadvantages | You may still need to pay an early repayment charge when switching to a new mortgage deal. | You may still need to pay an early repayment charge when switching to a new mortgage deal. |
Tracker mortgages are a type of variable rate mortgage.
Standard variable rate (SVR) mortgages follow the basic interest rate set by your lender. Like tracker mortgages, rates can fluctuate.
You’ll be moved onto your lender’s standard variable rate once your current mortgage deal comes to an end. The SVR can be set at a much higher rate, so it could be worth switching to a new mortgage deal before your current one ends.
A fixed-rate mortgage gives you a fixed interest rate throughout your mortgage term. These mortgage rates usually depend on a number of factors, such as your LTV and how long the deal is.
A fixed-rate mortgage means your interest rate won’t change during your deal, no matter what happens to the interest rate. A key benefit of fixed-rate mortgages is knowing exactly how much you’ll repay each month, which can help with budgeting.
You may be able to make overpayments on your tracker mortgage without having to pay an early repayment charge (ERC), but you should always check with your lender before doing so.
There are 2 kind of tracker mortgages:
HSBC currently offers term trackers.
Your property may be repossessed if you do not keep up repayments on your mortgage.
