Should You Get a Tracker or Fixed Rate Mortgage in 2025?

Further interest rate drops could be on the horizon. We're taking a snapshot of the best rates available on the market today for fixed and tracker mortgage products to see how they compare.

Inflation has dropped, and it's likely we will see mortgage rates reduced further before the year is out. Many are asking what this means for our mortgages in the coming months.

For those looking at buying property or re-mortgaging, the question at hand is whether a fixed or tracker mortgage is most suitable right now.

In this guide, we go through the pros and cons of fixed-rate mortgages compared to trackers to help you decide what type of mortgage is right for you.

Key Takeaways

• Knowing if a fixed or tracker mortgage is right for you will ultimately depend on whether you prefer flexibility or getting locked into a stable rate.

  
  

• A tracker mortgage typically fluctuates with the Bank of England base rate, so if the base rate drops, you could save on your mortgage.

  
  

• A fixed-rate mortgage locks you into a specific interest rate for a set amount of time. If the base rate increases during your terms, you could make substantial savings.

  
  

• However, if the base rate decreases, your fixed-rate deal won't be the most affordable on the market. 

  
  

• Terms can vary between 2, 5 and 10-year deals - and how affordable they are will depend on the wider economic landscape.

What is a Fixed Rate Mortgage?

A fixed mortgage is a mortgage with a guaranteed rate of interest for a specified term.

This means that the interest rate you pay on your loan will not change for the duration of your fixed term.

This doesn't mean the entire duration of your entire mortgage - which could be 25 years or more - but just the duration of your current deal.

How Long Does a Fixed Rate Mortgage Last?

You can get fixed rate mortgages for various term lengths, but most are typically 2 year or 5 year fixed terms.

3 year fixed rates are also available from some lenders, and even 10 year fixed rate mortgages became popular in response to prolonged low interest rates in the UK before 2022.

What Interest Rates Can I Get?

The rate you get will depend on the mortgage market at the time and the product you take out. Economic factors and other variables affect rates over time, and in turn, this can shape what mortgage type might be best for you. 

Here are 3 tables showing some of the best rates on the market for each type, along with some historical rates from the past year for comparison:

March 2023 

Term	Product	Type	LTV	Rate	Subsequent Rate	Product Fee	ERC
2 years	Fixed	Purchase	60%	4.14%	7.49%	£999	No
5 years	Fixed	Remortgage	60%	3.89%	7.49%	£999	Yes
10 years	Fixed	Remortgage	75%	4.04%	7.49%	£999	Yes

September 2023

Term	Product	Type	LTV	Rate	Subsequent Rate	Product Fee	ERC
2 years	Tracker	Purchase	60%	5.39%	8.4%	£999.00	No
5 years	Fixed	Remortgage	60%	5.12%	6.9%	£490.00	Yes
10 years	Fixed	Remortgage	75%	4.91%	6.2%	£999.00	Yes

March 2024

Term	Product	Type	LTV	Rate	Subsequent Rate	Product Fee	ERC
2 years	Tracker	Purchase	60%	4.44%	8.74%	£0	No
5 years	Fixed	Remortgage	60%	4.24%	7.99%	£490.00	Yes
10 years	Fixed	Remortgage	75%	4.63%	7.99%	£999.00	Yes

October 2024

Term	Product	Type	LTV	Rate	Subsequent Rate	Product Fee	ERC
2 years	Fixed	Remortgage	60%	3.89%	6.80%	£999.00	Yes
5 years	Fixed	Remortgage	60%	3.79%	5.80%	£490.00	Yes
10 years	Fixed	Remortgage	75%	4.69%	5.60%	£999.00	Yes

Source: Moneyfacts

What Happens At The End of My Fixed Rate Mortgage Term?

After the duration of your fixed rate term, your mortgage will revert to your mortgage lender’s SVR (Standard Variable Rate). This rate will usually be considerably higher than a fixed or tracker interest rate.

We recommend thinking about either switching your mortgage with your existing lender to a new product or remortgaging to a new lender at this point to avoid paying significantly high-interest rates on an SVR mortgage.

NOTE: If your fixed rate deal is coming to an end in the next 6 months, contact us to benefit from a lesser-known trick to get a better mortgage deal.

What is a Tracker Mortgage?

A tracker mortgage is a mortgage with an interest rate linked to the Bank of England’s base rate.

For example, you could get a tracker mortgage that’s interest rate will always remain at 0.75% above the base rate.

When the base interest rate increases, your monthly mortgage repayments will go up. When the base rate decreases, they’ll go down. The 0.75% difference will stay the same for the duration of your tracker mortgage term.

What Are The Pros and Cons of a Fixed Rate Mortgage?

Pros:

• You know exactly how much your mortgage repayments will be for the duration of your fixed term

  
  

• Your mortgage interest rate can't increase during your fixed term, no matter what the base rate does

Cons:

• You could be paying a higher interest rate than a tracker mortgage if the base rate stays low or goes down

  
  

• The longer your fixed term, the higher the interest rate you’ll have to pay 

What Are the Pros and Cons of a Tracker Mortgage?

Pros:

• You could pay a cheaper rate than fixed rate products, especially if the base rate falls or stays the same

Cons:

• Your monthly mortgage payments could increase or fluctuate throughout your term

Are Interest Rates Going to Rise in 2025 and Beyond?

There is no way to be certain whether interest rates will continue to rise in the UK. However, while interest rates have been increasing consistently since 2021, many economists believe that rates will drop in the near-future.

Most recently, the Bank of England's base rate was kept at 5.25% with aims to combat inflation, which has now dropped to 2% which is the Bank's target.

Bank of England governor Andrew Bailey has hinted that once the committee can be sure that inflation is dropping sustainably, we may see a reduction in the coming months - the next meeting being on 1st August for a vote to be held.

Many homeowners whose fixed rates are ending this year are still hoping that the base rate will be reduced soon, easing the pressure on households across the UK.

But what about over the next few years? Is it worth fixing for 3-5 years now? 

How We Can Help

If you’re unsure what kind of product is best for you, having a conversation with one of our trusted mortgage advisers will give you peace of mind that you’re making the right decision.

We can help you decide on the type of mortgage that's right for you. And we can negotiate the best interest rates with lenders and get access to some fixed-rate deals that aren’t available to customers going direct.

To see what we can do for you, call us at 0203 750 0305 or book a free consultation.