Mortgage Rates Explained — Fixed, Variable & Tracker UK
Fixed, variable, tracker, SVR — mortgage rate types can be confusing. Learn how each works, what drives rate changes, and how to pick the right one.
When you take out a mortgage, the interest rate you agree to determines how much you’ll pay on top of the amount you borrow. Over a typical 25–30 year mortgage term, even a small difference in your interest rate — as little as 0.25% — can add up to thousands of pounds in extra or saved interest. Yet despite its enormous financial impact, many borrowers choose their rate type based on little more than whichever number looks lowest on a comparison table, without fully understanding how each type behaves over time or what risks it carries.
In the UK mortgage market, there are four main rate types you’ll encounter: fixed rates, standard variable rates (SVR), tracker rates, and discounted variable rates. Each has distinct characteristics that make it more or less suitable depending on your financial circumstances, your appetite for risk, and how long you plan to stay in the property. A fixed rate gives you certainty but locks you in; a tracker follows the Bank of England base rate and can go up or down; an SVR is your lender’s default rate that you typically fall onto when a deal ends — and it’s almost always more expensive than the alternatives.
In this guide, we explain exactly how each rate type works in plain English, compare them side by side so you can see the trade-offs at a glance, show you how the Bank of England base rate feeds through to your monthly payments, and help you decide which type suits your situation. Whether you’re a first-time buyer choosing your first mortgage, a homeowner looking to remortgage before your deal expires, or a landlord reviewing your portfolio, understanding mortgage rates is essential to making the right financial decision.
How mortgage interest rates work
When a lender offers you a mortgage, the interest rate is the annual cost of borrowing expressed as a percentage. If you borrow £200,000 at 4.5% interest on a repayment mortgage over 25 years, your monthly payment covers both the interest charged that month and a portion of the original loan amount (the capital). In the early years, a larger share of each payment goes toward interest; as you pay down the balance, the interest portion shrinks and more of your payment reduces the capital.
Mortgage rates in the UK are influenced by several factors: the Bank of England base rate, the cost of funding in wholesale money markets (known as swap rates), the lender’s own cost of operations, and the level of competition in the market. When the base rate rises, borrowing becomes more expensive for lenders, and they typically pass that increase on to customers through higher mortgage rates. When it falls, rates tend to follow — though not always immediately or by the same amount.
When a lender offers you a mortgage, the interest rate is the annual cost of borrowing expressed as a percentage. If you borrow £200,000 at 4.5% interest on a repayment mortgage over 25 years, your monthly payment covers both the interest charged that month and a portion of the original loan amount (the capital). Use our repayment calculator to see exactly how payments break down at different rates.
Mortgage rates in the UK are influenced by several factors: the Bank of England base rate, the cost of funding in wholesale money markets (known as swap rates), the lender’s own cost of operations, and the level of competition in the market. Your loan-to-value ratio also has a significant effect — a lower LTV typically unlocks better rates. When the base rate rises, borrowing becomes more expensive for lenders, and they typically pass that increase on to customers through higher mortgage rates.
What are swap rates?
Swap rates are the rates at which banks lend to each other over set periods (e.g. 2-year or 5-year swaps). They directly influence the pricing of fixed-rate mortgages. When swap rates rise, new fixed-rate deals tend to become more expensive — even if the Bank of England base rate hasn’t changed.
Fixed-rate mortgages
A fixed-rate mortgage locks your interest rate for an agreed period — typically two, three, or five years, though some lenders offer seven- or even ten-year fixes. During this period, your monthly payment stays exactly the same regardless of what happens to the Bank of England base rate or the broader economy. This makes budgeting straightforward and protects you from rate rises.
The trade-off is flexibility. Most fixed-rate deals come with early repayment charges (ERCs) that apply if you want to leave the deal before it ends. These charges are usually between 1% and 5% of the outstanding balance, which on a £200,000 mortgage could mean a penalty of £2,000 to £10,000. You also won’t benefit if rates fall during your fixed period — you’re locked in at the rate you agreed to.
A fixed-rate mortgage locks your interest rate for an agreed period — typically two, three, or five years, though some lenders offer seven- or even ten-year fixes. During this period, your monthly payment stays exactly the same regardless of what happens to the Bank of England base rate or the broader economy. This makes budgeting straightforward and is especially popular with first-time buyers who want payment certainty.
The trade-off is flexibility. Most fixed-rate deals come with early repayment charges (ERCs) that apply if you want to leave the deal before it ends. These charges are usually between 1% and 5% of the outstanding balance, which on a £200,000 mortgage could mean a penalty of £2,000 to £10,000. You also won’t benefit if rates fall during your fixed period — you’re locked in at the rate you agreed to. See our overpayment calculator to explore how extra payments can offset higher fixed rates.
Common fixed-rate terms
Around 80% of UK mortgage borrowers currently choose a fixed rate. The certainty of knowing exactly what you’ll pay each month is hard to beat — especially during periods of economic uncertainty.
Variable, tracker, and SVR mortgages
Variable-rate mortgages come in several forms, but they all share one characteristic: your interest rate can change during the mortgage term, which means your monthly payments can go up or down.
A tracker mortgage is directly linked to the Bank of England base rate. The lender sets a margin above (or occasionally below) the base rate — for example, base rate plus 0.75%. If the base rate is 4.5%, you’d pay 5.25%. If the base rate drops to 4%, your rate automatically falls to 4.75%. Trackers offer transparency because you can see exactly how your rate is calculated, but they expose you to the risk of base rate increases.
A standard variable rate (SVR) is the default rate your lender charges once your initial deal period (fixed, tracker, or discounted) ends. The SVR is set entirely at the lender’s discretion — they can raise or lower it whenever they choose, by whatever amount they decide. SVRs are almost always higher than the rates available on new mortgage deals, which is why it’s so important to remortgage before your current deal expires.
Variable-rate mortgages come in several forms, but they all share one characteristic: your interest rate can change during the mortgage term, which means your monthly payments can go up or down. Understanding how each type works is key to deciding how much you can borrow and what you can afford.
A tracker mortgage is directly linked to the Bank of England base rate. The lender sets a margin above (or occasionally below) the base rate — for example, base rate plus 0.75%. If the base rate is 4.5%, you’d pay 5.25%. If the base rate drops to 4%, your rate automatically falls to 4.75%. Trackers offer transparency because you can see exactly how your rate is calculated, but they expose you to the risk of base rate increases. Buy-to-let landlords sometimes favour trackers for the flexibility they offer.
A standard variable rate (SVR) is the default rate your lender charges once your initial deal period (fixed, tracker, or discounted) ends. The SVR is set entirely at the lender’s discretion — they can raise or lower it whenever they choose, by whatever amount they decide. SVRs are almost always higher than the rates available on new mortgage deals, which is why it’s so important to remortgage before your current deal expires.
Rate types at a glance
| Fixed Rate | Tracker / Variable |
|---|---|
| Payment stays the same for the deal period | Payment moves with the base rate (tracker) or lender’s discretion (SVR) |
| Easy to budget with no surprises | Could pay less if rates fall |
| Protected from base rate increases | Could pay more if rates rise |
| Early repayment charges apply if you leave early | Trackers often have lower or no ERCs |
How the Bank of England base rate affects your mortgage
The Bank of England’s Monetary Policy Committee (MPC) meets eight times a year to set the base rate, which is the interest rate the Bank charges other banks and building societies to borrow money. It’s the single most influential factor in the UK mortgage market. When the MPC raises the base rate, the cost of borrowing increases across the economy; when it cuts, borrowing becomes cheaper.
If you have a tracker mortgage, a base rate change affects you immediately — your payments go up or down the following month. If you’re on an SVR, your lender may choose to pass on some or all of the change, though they’re not obliged to. If you’re on a fixed rate, you’re unaffected until your deal ends. However, the base rate at the time your fix expires will determine the deals available to you when you come to remortgage.
The Bank of England’s Monetary Policy Committee (MPC) meets eight times a year to set the base rate, which is the interest rate the Bank charges other banks and building societies to borrow money. It’s the single most influential factor in the UK mortgage market and directly affects how much you can borrow. When the MPC raises the base rate, the cost of borrowing increases across the economy; when it cuts, borrowing becomes cheaper.
If you have a tracker mortgage, a base rate change affects you immediately — your payments go up or down the following month. If you’re on an SVR, your lender may choose to pass on some or all of the change, though they’re not obliged to. If you’re on a fixed rate, you’re unaffected until your deal ends. However, the base rate at the time your fix expires will determine the deals available to you when you come to remortgage.
Don’t sit on your lender’s SVR
When your fixed or tracker deal ends, you’ll automatically move onto your lender’s SVR. The average SVR in the UK is typically 1.5–2% higher than the best available mortgage rates. On a £200,000 mortgage, that could cost you £250–£350 extra per month. Start looking for your next deal at least 3–6 months before your current one expires.
Fixed rate holders
- Unaffected by base rate changes during the deal period. Plan your remortgage 3–6 months before the fix ends.
Tracker rate holders
- Payments change automatically when the base rate moves. Budget for possible increases if rates are expected to rise.
SVR holders
- Your lender can change your rate at any time. You’re almost certainly paying more than you need to — speak to a broker about switching.
How to choose the right rate type for you
There is no single “best” mortgage rate type — the right choice depends on your personal and financial circumstances. If you value certainty and want to know exactly what you’ll pay each month, a fixed rate is usually the safest option, particularly if you’re stretching your budget to buy. If you believe rates are likely to fall and you’re comfortable with some risk, a tracker could save you money. If you plan to move or remortgage within a year or two, a tracker with no early repayment charges can offer valuable flexibility.
Consider how long you plan to stay in the property, whether your budget can absorb payment increases, and what direction you think interest rates are heading. A mortgage broker can model different scenarios for you, showing exactly what you’d pay under each rate type across various base rate assumptions.
There is no single “best” mortgage rate type — the right choice depends on your personal and financial circumstances. If you value certainty and want to know exactly what you’ll pay each month, a fixed rate is usually the safest option, particularly if you’re stretching your budget to buy. If you believe rates are likely to fall and you’re comfortable with some risk, a tracker could save you money. If you plan to move home or remortgage within a year or two, a tracker with no early repayment charges can offer valuable flexibility.
Consider how long you plan to stay in the property, whether your budget can absorb payment increases, and what direction you think interest rates are heading. A mortgage broker can model different scenarios for you, showing exactly what you’d pay under each rate type across various base rate assumptions. Get in touch for free, no-obligation advice tailored to your situation.
Decision framework
- 01
Assess your risk tolerance
If the thought of your payments increasing keeps you up at night, lean toward a fixed rate. If you can comfortably absorb a £200–£300 monthly increase, a tracker may be worth considering.
- 02
Consider your timeframe
Match your deal length to your plans. If you might sell within two years, a 5-year fix with ERCs could be costly. A 2-year fix or a tracker with no ERCs gives you more freedom.
- 03
Look at the rate environment
When rates are high and expected to fall, trackers become attractive. When rates are low and expected to rise, locking in a fix protects your payments.
- 04
Factor in fees
A lower headline rate sometimes comes with a higher arrangement fee (£500–£1,500). Compare the total cost over the deal period, not just the rate.
Run the numbers
- Repayment CalculatorFree tool
Enter your mortgage amount, rate, and term to see your monthly repayments and total interest paid across the full term.
- Overpayment CalculatorFree tool
See how making overpayments could reduce your term and save you thousands in interest — particularly useful when comparing rate options.
When to lock in your rate
Timing matters in the mortgage market. Most lenders allow you to lock in a rate 3–6 months before you need the mortgage to complete. This is known as a rate reservation or rate lock. If rates rise during that window, you’re protected because you’ve already secured your deal. If rates fall, some lenders will allow you to switch to a better product before completion at no extra cost.
If you’re remortgaging, you can start the process up to six months before your current deal expires. This gives you time to compare options without being rushed into a decision. Your new lender will issue a mortgage offer that’s typically valid for three to six months, giving you a safety net.
Timing matters in the mortgage market. Most lenders allow you to lock in a rate 3–6 months before you need the mortgage to complete. This is known as a rate reservation or rate lock. If rates rise during that window, you’re protected because you’ve already secured your deal. Understanding mortgage rates and how they move can help you decide when to commit.
If you’re remortgaging, you can start the process up to six months before your current deal expires. This gives you time to compare options without being rushed into a decision. Your new lender will issue a mortgage offer that’s typically valid for three to six months, giving you a safety net.
The 6-month rule
Set a reminder for 6 months before your current mortgage deal expires. This gives you the maximum window to compare rates, apply, and get an offer in place — without any risk of slipping onto your lender’s SVR.
The biggest mistake borrowers make isn’t choosing the wrong rate type — it’s doing nothing when their deal ends and drifting onto their lender’s SVR. That inaction can cost hundreds of pounds every single month.
Related guides
- When and How to Remortgage
Switching at the right time can save you hundreds a month. Learn the full remortgage process.
- What Is Loan-to-Value (LTV)?
Your LTV ratio determines which rate bands you qualify for — and how good a deal you can get.
- First-Time Buyer Guide
Choosing between fixed and tracker rates is one of the biggest decisions for first-time buyers.
- A Guide to Remortgaging
The complete remortgage process — from checking your deal to locking in a new rate.
- Regulator
- FCA register
- Updated
- 24 February 2026
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