(Choose the right deal, dodge expensive defaults, and plan your exits like a pro)
TL;DR (60-second snapshot)
- Tracker: moves up & down with Bank of England base rate (e.g. “+0.75 % for 2 yrs”).
- Fixed: rate locked for a set term (2, 3, 5, 10 yrs). Budgeting simplicity, early-repayment charges (ERCs) if you bail early.
- SVR (Standard Variable Rate): the lender’s default rate after your deal ends. No ERCs— but usually 2-4 pp higher than best fixes/trackers, so treat it as a stop-gap only.
1 | Quick definitions
| Product | Peg | Typical headline | Who controls changes? |
|---|---|---|---|
| Tracker | BoE base rate | “Base + 0.69 % for 2 yrs” | BoE – every Monetary Policy Committee move feeds through the next month |
| Discount-variable | Lender’s SVR | “SVR – 1.50 % for 2 yrs” | Lender – they set SVR whenever they like |
| Fixed | None | “4.89 % fixed to 31 Aug 2029” | No one until the end date |
| SVR | None | “7.99 % variable” | Lender discretion |
2 | How each one works
Tracker
- Interest recalculated the day base rate moves.
- Follows down as well as up (unless “collared” at a floor).
- ERCs often light (e.g. 1 % of balance) or 0 % for “no-ERC” trackers.
Fixed
- Monthly payment stays identical within the term.
- Protects the risk-averse; handy for tight household budgets.
- ERCs chunky (2-5 % early years, tapering over term).
SVR
- Kicks in automatically when your incentive deal ends.
- Freely overpay or remortgage anytime—no penalties.
- Expensive safety net; fine for a month or two while switching.
3 | Pros & cons at a glance
| Tracker | Fixed | SVR | |
|---|---|---|---|
| Ride rate drops | 👍 | ❌ | 👍/❌ (if lender cuts) |
| Payment certainty | ❌ | 👍 | ❌ |
| Low/zero ERCs | 👍 | ❌ | 👍 |
| Cheapest headline today | Often | Sometimes | Rarely |
| Best for | Flexible over-payers, rate-cut optimists | Budgeters, risk-averse, long-term planners | Very short stopgap |
4 | Break-even maths: sample £250k mortgage, 25 yrs
- 2-year tracker: Base + 0.69 % (start 5.94 %)
- 2-year fix: 5.49 %
- Assume base rate falls 0.50 pp in year 2
| Year | Tracker rate | Annual interest £ | Fixed interest £ | Gain / loss |
|---|---|---|---|---|
| 1 | 5.94 % | £14,580 | £13,725 | –£855 |
| 2 | 5.44 % | £13,358 | £13,725 | +£367 |
With one 0.50 pp base-rate cut, tracker roughly breaks even vs. the fix. Two cuts? Tracker wins decisively. No cuts and a hike? Fix would prove cheaper.
5 | Who typically chooses which?
- First-time buyers → 5-yr fix for budget certainty & no remortgage hassle mid-term.
- Remortgagers watching the BoE → 2-yr no-ERC tracker to ride possible cuts, then switch.
- Buy-to-let landlords → 2-yr fix or discount to keep ERC window short.
- Borrowers expecting lump-sum bonus/inheritance → tracker or SVR (cheap exit).
6 | Smart switching strategy
- Diary reminder 6 m before deal ends.
- Compare fixes vs. trackers vs. product-transfer offers.
- Lock a new deal up to 6 m early; if market rates fall, re-apply.
- Avoid sitting on SVR more than 1-2 payments unless you need ERC-free flexibility.
7 | FAQs
Is a tracker the same as a variable?
All trackers are variable, but not all variables track base rate—discount and SVR are controlled by the lender.
Can I overpay on a fix?
Usually up to 10 % of the balance per year before ERCs bite (check Key Facts).
What’s a collar on a tracker?
A minimum rate below which the deal won’t fall. Popular floors are 1 %-2 %.
Early-repayment charges on SVR?
None. That’s why it’s useful as a temporary home.
8 | Next-step checklist ✅
- Pull your current mortgage expiry date & rate.
- Decide priority: payment certainty or lowest possible cost.
- Use a broker’s true-cost comparison (rate + fees + ERC risk).
- Stress-test tracker affordability at +2 pp.
- Secure a new deal or tracker buffer before your fixed/discount term ends.
Need personal guidance?
We’ll compare live tracker, fixed and product-transfer options across 90+ lenders and show what’s cheapest after fees and ERC risk.