Fixed or tracker rate when you remortgage?

A fixed rate locks your payment for a set period, giving certainty but an early repayment charge if you leave early. A tracker follows the Bank of England base rate plus a margin, so your payment moves up or down with it. The right choice depends less on predicting rates and more on how much certainty you need and how much movement your budget can absorb.

Fixed or tracker — what’s the real question?

Answer first: the choice isn’t “which will be cheaper?” — nobody can reliably predict that. The real question is “how much certainty do I need, and how much can my budget absorb if my payment moves?” A fix buys you a guaranteed payment; a tracker buys you flexibility and exposure to the base rate. Both are legitimate; the right one depends on your circumstances.

When you remortgage, choosing the rate type is as important as choosing the lender. It shapes your monthly payment, your flexibility to leave, and how exposed you are to the wider rate environment for the next few years. Let’s take each in turn, then bring it back to how to decide.

How does a fixed rate work?

Answer first: a fixed rate locks your interest rate — and therefore your monthly payment — for a set period, commonly two or five years. Whatever happens to the base rate during that time, your payment doesn’t change. In exchange you usually accept an early repayment charge if you leave before the fix ends.

The product a fix really sells is certainty. You know exactly what you’ll pay every month for the fixed period, which makes budgeting simple and protects you if rates rise. That certainty is especially valuable if your outgoings are tight or your income is variable — which is often the case for contractors between engagements.

Two things to understand about fixes:

• Pricing. Fixed rates are priced off swap rates — the market’s view of where interest rates are heading over the next few years — not directly off today’s base rate. That’s why fixed pricing can move even when the base rate doesn’t. Our fixed-rate mortgages page explains this in more depth.
• Early repayment charges. Leaving a fix early normally triggers an early repayment charge, a percentage of the balance. That’s the cost of the certainty, and it’s why timing your remortgage around the end of your current fix matters.

How does a tracker work?

Answer first: a tracker rate follows the Bank of England base rate plus a fixed margin — for example “base rate + 0.75%”. When the base rate changes, your rate and payment change with it, usually within a month or so. You get the benefit of any cuts and the risk of any rises.

A tracker’s product is flexibility and transparency. You can see exactly how your rate is built, and many trackers carry lower early repayment charges than fixes — sometimes none — which suits borrowers who might move, repay a lump sum, or remortgage again soon. The trade-off is that your payment isn’t guaranteed: if the Bank of England raises Bank Rate, your payment rises too.

Our tracker mortgages page covers how the margin and term work in practice. The key mechanical difference from a fix is the driver: a tracker follows the base rate, while a fix follows swap rates — which is why the two don’t always move together.

What about the standard variable rate — isn’t that variable too?

Yes, but it’s not the same thing, and it’s not a deal you’d choose. The standard variable rate (SVR) is the lender’s default rate after any deal ends; the lender sets it at will and it’s usually expensive. A tracker is a chosen variable-rate product with a transparent link to the base rate. Don’t confuse “I’ll go variable” with “I’ll let myself fall onto the SVR” — the first can be a deliberate strategy, the second is the thing remortgaging exists to avoid.

How should you actually decide?

Answer first: weigh two things — your need for certainty, and your budget’s tolerance for the payment moving. If certainty matters most and you’ll keep the deal for its full term, lean fixed. If flexibility matters, you can absorb a rise, or you may leave early, a tracker is worth considering.

A few honest decision pointers:

• Choose a fix if a predictable payment is important, your budget has little slack, or you want to remove rate worry for a few years and will hold the deal to term.
• Consider a tracker if you value flexibility, might move or make overpayments, can comfortably handle your payment rising, or specifically want to benefit immediately from any base-rate cuts.
• Term length matters too. A shorter fix gives certainty now and an earlier chance to reprice; a longer fix locks in for longer. There’s no universally right answer — it depends on how long you want certainty for.

What you should not do is base the whole decision on a forecast. Trying to second-guess the bottom of the rate cycle is difficult even for the market, and the cost of guessing wrong is real. A sounder approach is to match the product to your circumstances and, whichever you choose, time the switch well — lining up a new deal three to six months before your current one ends.

Does being a contractor change the choice?

It can tilt it. Contractors often have variable income — strong months, quieter gaps between contracts — which raises the value of payment certainty. For many self-employed borrowers, a fix’s predictable payment is easier to manage around an irregular income than a tracker that could rise just as a contract is ending. That’s a personal judgement, not a rule, but it’s worth weighing. Whichever you choose, the priority is being placed with a lender that reads your income correctly in the first place — covered in remortgaging when self-employed.

Two years or five — and what about offset or discounted?

Answer first: if you choose a fix, the length is its own decision — a shorter fix gives an earlier chance to reprice, a longer one locks certainty in for longer. And fixed and tracker aren’t the only two options: offset and discounted deals can suit specific circumstances.

On fix length, there’s no universally right answer. A two-year fix suits you if you want certainty now but expect your circumstances or the rate environment to change soon and want to revisit sooner. A five-year fix suits you if you value a long stretch of guaranteed payments and don’t want the cost and effort of remortgaging again quickly — though you’re committing to a longer early repayment charge period.

Two other rate types are worth knowing about:

• Offset. An offset mortgage links your savings to the loan so you’re charged interest only on the difference. It’s particularly useful for contractors and directors who hold cash for tax — you cut interest without locking the money away.
• Discounted. A discounted or capped rate is a variable rate set at a margin below the lender’s SVR, sometimes with a ceiling. It’s another variable-rate option with its own trade-offs.

The point is that “fixed or tracker” is the headline choice, but the right answer for you might be a particular fix length, or a different product type altogether — which is what a whole-of-market review is for.

The bottom line

Fixed versus tracker isn’t a bet on the market — it’s a match to your circumstances. A fix buys certainty and protects against rises, at the cost of an early repayment charge if you leave early. A tracker offers flexibility and the upside of any cuts, at the cost of exposure to rises. Decide on how much certainty you need and how much movement your budget can take, pick the term that fits, and time the remortgage around your current deal’s end date. To weigh the two for your own figures and circumstances, speak to an adviser — and start from the remortgage hub for the wider picture.