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Should You Get a Tracker or Fixed Rate Mortgage in 2024?
Further interest rate drops could be on the horizon. We're taking a snapshot of the best rates available on the market today for fixed and tracker mortgage products to see how they compare.
Written by: Sam Hodgson
Inflation has dropped, and it's likely we will see mortgage rates reduced further before the year is out. Many are asking what this means for our mortgages in the coming months.
For those looking at buying property or remortgaging, the question at hand is whether a fixed or tracker mortgage is most suitable right now.
In this guide, we go through the pros and cons of fixed-rate mortgages compared to trackers to help you decide what type of mortgage is right for you.
Key Takeaways
- Knowing if a fixed or tracker mortgage is right for you will ultimately depend on whether you prefer flexibility or getting locked into a stable rate.
- A tracker mortgage typically fluctuates with the Bank of England base rate, so if the base rate drops, you could save on your mortgage.
- A fixed-rate mortgage locks you into a specific interest rate for a set amount of time. If the base rate increases during your terms, you could make substantial savings.
- However, if the base rate decreases, your fixed-rate deal won't be the most affordable on the market.
- Terms can vary between 2, 5 and 10-year deals - and how affordable they are will depend on the wider economic landscape.
See similar: Property Market Update - Buyer Demand 11% Higher in 2024
In this guide:
What is a Fixed Rate Mortgage?
How Long Does a Fixed Rate Mortgage Last?
What Interest Rates Can I Get?
What Happens At The End of My Fixed Rate Mortgage Term?
The Pros and Cons of Fixed Rate Mortgages
The Pros and Cons of Tracker Mortgages
Are Interest Rates Going to Rise in 2024 and Beyond?
- What Do The Experts Say?
How Can a Mortgage Broker Help?
What is a Fixed Rate Mortgage?
A fixed mortgage is a mortgage with a guaranteed rate of interest for a specified term.
This means that the interest rate you pay on your loan will not change for the duration of your fixed term.
This doesn't mean the entire duration of your entire mortgage - which could be 25 years or more - but just the duration of your current deal.
How Long Does a Fixed Rate Mortgage Last?
You can get fixed rate mortgages for various term lengths, but most are typically 2 year or 5 year fixed terms.
3 year fixed rates are also available from some lenders, and even 10 year fixed rate mortgages became popular in response to prolonged low interest rates in the UK before 2022.
See similar: How Will The General Election Affect the Property Market?
What Interest Rates Can I Get?
The rate you get will depend on the mortgage market at the time and the product you take out. Economic factors and other variables affect rates over time, and in turn, this can shape what mortgage type might be best for you.
Here are 3 tables showing some of the best rates on the market for each type, along with some historical rates from the past year for comparison:
March 2023
|
Term |
Product |
Type |
LTV |
Rate |
Subsequent Rate |
Product Fee |
ERC |
|
2 years |
Fixed |
Purchase |
60% |
4.14% |
7.49% |
£999 |
No |
|
5 years |
Fixed |
Remortgage |
60% |
3.89% |
7.49% |
£999 |
Yes |
|
10 years |
Fixed |
Remortgage |
75% |
4.04% |
7.49% |
£999 |
Yes |
September 2023
|
Term |
Product |
Type |
LTV |
Rate |
Subsequent Rate |
Product Fee |
ERC |
|
2 years |
Tracker |
Purchase |
60% |
5.39% |
8.4% |
£999.00 |
No |
|
5 years |
Fixed |
Remortgage |
60% |
5.12% |
6.9% |
£490.00 |
Yes |
|
10 years |
Fixed |
Remortgage |
75% |
4.91% |
6.2% |
£999.00 |
Yes |
March 2024
|
Term
|
Product
|
Type
|
LTV
|
Rate
|
Subsequent Rate
|
Product Fee
|
ERC
|
|
2 years
|
Tracker
|
Purchase
|
60%
|
4.44%
|
8.74%
|
£0
|
No
|
|
5 years
|
Fixed
|
Remortgage
|
60%
|
4.24%
|
7.99%
|
£490.00
|
Yes
|
|
10 years
|
Fixed
|
Remortgage
|
75%
|
4.63%
|
7.99%
|
£999.00
|
Yes
|
| Term | Product | Type | LTV | Rate | Subsequent Rate | Product Fee | ERC |
| 2 years | Fixed | Remortgage | 60% | 3.89% | 6.80% | £999.00 | Yes |
| 5 years | Fixed | Remortgage | 60% | 3.79% | 5.80% | £490.00 | Yes |
| 10 years | Fixed | Remortgage | 75% | 4.69% | 5.60% | £999.00 | Yes |
See Similar: Is Now the Time to Switch? Major Lender Offers New 5 Year Fix with No ERCs
What Happens At The End of My Fixed Rate Mortgage Term?
After the duration of your fixed rate term, your mortgage will revert to your mortgage lender’s SVR (Standard Variable Rate). This rate will usually be considerably higher than a fixed or tracker interest rate.
We recommend thinking about either switching your mortgage with your existing lender to a new product or remortgaging to a new lender at this point to avoid paying significantly high-interest rates on an SVR mortgage.
NOTE: If your fixed rate deal is coming to an end in the next 6 months, read this (includes a lesser-known trick to get a better mortgage deal): How early can you switch from a fixed rate mortgage?
Related: Our guide to securing a professional mortgage
What is a Tracker Mortgage?
A tracker mortgage is a mortgage with an interest rate linked to the Bank of England’s base rate.
For example, you could get a tracker mortgage that’s interest rate will always remain at 0.75% above the base rate.
When the base interest rate increases, your monthly mortgage repayments will go up. When the base rate decreases, they’ll go down. The 0.75% difference will stay the same for the duration of your tracker mortgage term.
Related: What is a Green Mortgage and how do they work?
What Are The Pros and Cons of a Fixed Rate Mortgage?
Pros:
- You know exactly how much your mortgage repayments will be for the duration of your fixed term
- Your mortgage interest rate can't increase during your fixed term, no matter what the base rate does
Cons:
- You could be paying a higher interest rate than a tracker mortgage if the base rate stays low or goes down
- The longer your fixed term, the higher the interest rate you’ll have to pay
What Are the Pros and Cons of a Tracker Mortgage?
Pros:
- You could pay a cheaper rate than fixed rate products, especially if the base rate falls or stays the same
Cons:
- Your monthly mortgage payments could increase or fluctuate throughout your term
Related: Can you get a mortgage for 5 or 6 times your salary?
Are Interest Rates Going to Rise in 2024 and Beyond?
There is no way to be certain whether interest rates will continue to rise in the UK. However, while interest rates have been increasing consistently since 2021, many economists believe that rates will drop in the near-fu.
Most recently, the Bank of England's base rate was kept at 5.25% with aims to combat inflation, which has now dropped to 2% which is the Bank's target.
Bank of England governor Andrew Bailey has hinted that once the committee can be sure that inflation is dropping sustainably, we may see a reduction in the coming months - the next meeting being on 1st August for a vote to be held.
Many homeowners whose fixed rates are ending this year are still hoping that the base rate will be reduced soon, easing the pressure on households across the UK.
But what about over the next few years? Is it worth fixing for 3-5 years now?
Read blog: Is Switching Lenders Really Worth It?
What Do The Experts Say?
George Abouzolof
Senior Finance Broker CeMAP
Inflation has dropped below 2%, which isn’t favourable news for the UK’s economic growth. The 2% target strikes a fine balance between avoiding high levels of inflation while maintaining healthy GDP growth.
2% inflation per year is typically an indicator of a healthy economy, so it’s likely that there will be further reductions from the Bank of England to stimulate market movement. If this goes ahead, there will consequently be more affordable mortgage rates in the coming months.
There’s also a level of concern regarding rental yields, less attractive stamp duty and BTL legislation which could see a further number of landlords selling up. This could free up a number of starter homes for those waiting to get on the property ladder, but it may also put pressure on already competitive rental market.
And how about our readers?
150 of our readers completed our interest rates survey in the last few months. Here are the results:
- Just 18% of participants believe interest rates will rise over the next 12 months, while 82% expect either a decrease or for rates to stay the same.
For more on the topic, read our blog: NEWS: Are Mortgage Rates Going Down?
Are you more of a visual learner?
Our video below summarises fixed and tracker mortgages, the pros and cons of each, and how they work to help you decide:
How We Can Help
If you’re unsure what kind of product is best for you, having a conversation with one of our trusted mortgage advisers will give you peace of mind that you’re making the right decision.
We can help you decide on the type of mortgage that's right for you. And we can negotiate the best interest rates with lenders and get access to some fixed-rate deals that aren’t available to customers going direct.
To see what we can do for you, call us at 0203 900 4322 or book a free consultation below.
