Fixed or Tracker? Choosing Your Next Rate

Mortgage rates have climbed again this autumn, with many lenders raising their fixed rates more than once in recent weeks. If your current deal is ending soon, one of the biggest decisions you’ll face is what type of rate to choose.

At the start of October, the average five-year fixed rate reached 6%, its highest level since September 2023, according to Moneyfacts. The Bank of England held the Bank Rate at 3.75% in September, but three of its nine policymakers voted for an increase. Its next decision is due on 5 November.

A fixed rate keeps your monthly payment the same for a set period, often two or five years. That certainty can make budgeting easier, particularly while other household costs are rising. The trade-off is that you may not benefit if rates fall, and leaving the deal early often means paying an early repayment charge.

A tracker rate follows the Bank Rate plus a set margin, so your payments move up or down whenever the Bank Rate changes. Some tracker deals are currently priced lower than comparable fixed rates, and many come with fewer early repayment charges. However, if the Bank Rate rises, your monthly payments will rise with it.

There is no single right answer. The most suitable option depends on how much room your budget has if payments increase, how long you plan to stay in your home and whether you might want to move or repay early.

It’s also worth remembering that if your deal ends without a new arrangement in place, you’ll usually move onto your lender’s standard variable rate, which is often considerably higher. Many lenders let you secure a new deal months in advance, giving you time to weigh up your options.

If you’d like to discuss the options available to you, contact your adviser.