Fixed vs tracker, the practical version
A fixed-rate mortgage gives you the same interest rate for a set term (commonly 2, 5, or 10 years). A tracker follows the Bank of England base rate plus a margin (e.g. base + 0.75%). Standard variable rates (SVR) are the lender’s default after a fix ends and are usually expensive. Fixed deals charge early repayment charges (ERCs) if you leave during the fix. Trackers are usually penalty-free or have small caps. Pick on whether you want certainty in monthly cost or flexibility to move and benefit if rates fall.
On a £250,000, 25-year repayment mortgage at 5.0% fixed for 5 years, the monthly payment is about £1,461. At a 4.5% tracker (base + 0.75% with BoE base at 3.75%), it is about £1,389. If base rates rise 1.5%, the tracker payment jumps to roughly £1,617, an extra £156 a month for two and a half years. If they fall, the tracker can save thousands. Fixed buys peace of mind; tracker is a bet that rates are heading your way.
Rolling onto the lender’s SVR when your fix ends. SVRs in 2024 are often 7% to 8.5%. On a £250,000 balance, that is hundreds of pounds a month more than a fresh remortgage to a market rate. Start shopping six months before the fix expires.
A 60-second lesson on this, with a worked drill, lives inside the Finlo app. Free, forever, on the basics.