Pillar Guide · Updated July 2026
Tracker vs Discount Mortgages: A Complete UK Guide for 2026/27
Both tracker and discount mortgages are variable rate products, but they move for different reasons — a tracker follows the Bank of England base rate directly, while a discount mortgage is priced relative to the lender's own standard variable rate. Understanding the difference matters when comparing risk and predictability.
What a Tracker Mortgage Is
A tracker mortgage sets your interest rate at a fixed margin above (occasionally below) the Bank of England base rate, so every time the Monetary Policy Committee changes the base rate, your mortgage rate — and therefore your payment — changes with it, usually within a set number of days. Because the base rate is public, a tracker's pricing is transparent and easy to follow.
What a Discount Mortgage Is
A discount mortgage charges a rate set at a fixed discount below the lender's own standard variable rate (SVR) — for example, 1.5 percentage points below SVR — for an initial period. Unlike the base rate, an SVR is set at the lender's discretion and can be changed independently of the Bank of England, which means a discount mortgage carries an extra, less transparent layer of variability.
Key Differences
The core difference is what each product tracks: a tracker follows an external, published benchmark (the base rate), while a discount mortgage follows an internal benchmark set by the lender (its SVR). This means a tracker moves predictably alongside Bank of England decisions, whereas a discount mortgage's movements depend partly on the lender's own commercial decisions about its SVR, which do not always mirror the base rate exactly.
Collars and Caps
Some tracker and discount mortgages include a "collar" (a floor below which the rate will not fall, even if the base rate or SVR does) or a "cap" (a ceiling above which the rate cannot rise). These features change the real-world risk and reward profile of the product, so always check the small print for either feature before choosing.
The Risks of Each
With a tracker, your main risk is a rising base rate, which is publicly signalled and often anticipated by financial markets. With a discount mortgage, your risk includes both a rising SVR and the possibility that the lender raises its SVR by more than any base rate movement would justify, since the lender retains discretion over its own standard variable rate.
Early Repayment Charges
Many tracker and discount deals carry an early repayment charge (ERC) during their initial period, though some lifetime tracker products come with no ERC at all, giving more flexibility to overpay, switch, or repay early. Always check the ERC schedule, since it can significantly affect the true cost of leaving a deal early.
Who Each Product Suits
Borrowers who want maximum transparency about what drives their rate, and who are comfortable with base-rate-linked payment changes, often prefer a tracker. Those choosing a discount mortgage should be comfortable with slightly less predictability, since the lender's own SVR decisions add a layer of uncertainty beyond the Bank of England's actions.
What Happens at the End of the Deal
When an initial tracker or discount period ends, you typically revert to the lender's standard variable rate unless you remortgage, switch to a new product, or transfer to another deal with the same lender. Since the SVR is usually higher than the initial deal rate, it is worth reviewing your options in good time before the deal expires.