Fixed-rate mortgages
Your interest rate — and therefore your monthly payment — stays the same for an agreed period, commonly two, five or ten years, regardless of what happens to wider interest rates. This gives budgeting certainty, at the cost of missing out if rates fall during the fixed period, and usually an early repayment charge if you want to leave the deal before it ends.
Standard variable rate (SVR)
Once any initial deal period ends, mortgages typically revert to the lender's standard variable rate — usually considerably higher than available fixed or tracker deals, and something lenders can change at their discretion. Staying on SVR long-term is rarely the cheapest option, which is why remortgaging before a deal ends is usually worthwhile.
Tracker mortgages
A tracker rate moves directly in line with a reference rate — typically the Bank of England base rate — plus a fixed margin set by the lender. Your payments rise and fall as the base rate changes, offering potential savings if rates fall, but exposure to higher payments if they rise, without the certainty of a fixed deal.
Comparing the trade-offs
| Type | Certainty | Best when |
|---|---|---|
| Fixed | High — payments don't change | You value predictable budgeting, or expect rates to rise |
| Tracker | Low — payments move with the base rate | You expect rates to fall, and can absorb payments rising too |
| SVR | Low, and usually the most expensive | Rarely a deliberate long-term choice |
Which suits you
If a payment increase would genuinely strain your budget, a fixed rate's certainty is usually worth more than the chance of saving money on a tracker. If you have financial flexibility to absorb higher payments and are comfortable with the uncertainty, a tracker can pay off if rates fall — but nobody can predict interest rate movements with confidence, so this is a genuine risk decision, not a sure thing.
Key takeaways
- Fixed-rate mortgages offer payment certainty for an agreed period.
- Tracker mortgages move with the Bank of England base rate, for better or worse.
- Standard variable rate, which deals revert to afterward, is usually the most expensive option.
- Choose based on how much payment certainty you need, not just where you think rates are headed.