Glossary · UK
What is Tracker Mortgage?
A variable-rate mortgage where the interest rate directly follows the Bank of England base rate plus a fixed margin, rising and falling automatically when the base rate changes.
Full Definition
A tracker mortgage is a type of variable-rate mortgage where the interest rate is set at a fixed margin above (or occasionally at) the Bank of England base rate, for example base rate plus 0.75%. Unlike a lender's standard variable rate, which the lender can change at its own discretion, a tracker rate moves automatically and transparently whenever the base rate changes, so monthly repayments rise when the Bank of England raises rates and fall when it cuts them. Trackers usually run for an initial period (two or five years is common) before reverting to the lender's SVR, and most carry an Early Repayment Charge during that initial period, though some "lifetime trackers" run for the full mortgage term, sometimes without ERCs. Trackers suit borrowers who can absorb payment increases and expect rates to fall or stay flat, whereas a fixed-rate mortgage suits those who prioritise predictable payments and protection against rate rises.