A tracker mortgage has an interest rate that is directly linked to the Bank of England base rate. It is expressed as the base rate plus a fixed margin — for example, base rate + 0.75%. If the base rate goes up, your mortgage rate goes up by exactly the same amount. If it comes down, your rate falls too.
This transparency is one of the main attractions of tracker mortgages. Unlike SVRs, which lenders can change at their discretion, a tracker’s movements are predictable and directly tied to an independent benchmark. You always know exactly why your rate has changed and by how much.
Tracker deals are typically available for two, three, or five years, and some lenders offer lifetime trackers that last the full mortgage term. They can be cheaper than fixed rates when the base rate is stable or falling, but they carry the risk that your payments could increase if the base rate rises. Some tracker products include a collar (minimum rate) or a cap (maximum rate) to limit how far the rate can move.
You take a two-year tracker at base rate + 0.5%. With the base rate at 4.5%, your mortgage rate is 5.0% and your monthly payment on a £200,000 mortgage is about £1,170. If the base rate drops to 4.0%, your rate falls to 4.5% and your payment drops to roughly £1,112, saving you around £58 per month.
Key Points
- Your rate is the base rate plus a set margin (e.g. base rate + 0.75%)
- Payments move up or down automatically when the Bank of England changes the base rate
- More transparent than SVRs because rate changes are tied to an independent benchmark
- Available as short-term deals (2–5 years) or lifetime trackers for the full term
- Some trackers include a cap or collar to limit how far the rate can move