How fixed, tracker, discount and standard variable rates work, the pros and cons of each, how to choose a deal length, and the questions to ask before you commit.
Choosing the type of mortgage rate decides how your payments behave over the next few years: whether they stay the same, move with the Bank of England, or depend on your lender's decisions. No type is always cheapest. The right choice depends on your budget, your plans and how much uncertainty you can live with.
Fixed-rate mortgages
Your interest rate, and so your monthly payment, stays the same for a set period, commonly two, three, five or ten years.
- Pros: certainty. Rate rises during the fix do not affect you, which makes budgeting easier.
- Cons: if rates fall, you do not benefit. Leaving early usually means an early repayment charge (ERC).
- Good for: people on tight budgets, or anyone who values knowing exactly what they will pay.
Tracker mortgages
The rate follows an index, usually the Bank of England Bank Rate, plus a set margin. For example, a tracker at Bank Rate + 1% moves up or down by the same amount whenever Bank Rate changes.
- Pros: you benefit straight away if rates fall. Some trackers have low or no ERCs, giving flexibility.
- Cons: payments rise if rates rise, with no limit unless there is a cap. Check for a "collar", a minimum rate below which yours will not fall.
- Good for: people with room in their budget who expect rates to fall, or who may move or repay soon.
Discount mortgages
The rate is set at a discount to the lender's own standard variable rate, for example SVR minus 1.5%. Because the lender sets the SVR, your rate can change even if Bank Rate does not.
Standard variable rate (SVR)
The lender's default rate, which you usually move to when a deal ends. SVRs are generally higher than deal rates and the lender can change them. Usually there is no ERC, so the SVR can work for short periods, but most people save by switching to a new deal.
Offset mortgages
Your savings are linked to the mortgage, and you pay interest only on the balance minus your savings. You earn no interest on the savings, but you avoid paying mortgage interest on that amount and there is no tax on the saving. Rates can be slightly higher, so they suit people with substantial savings.
How long to fix for?
- Shorter deals (two years) keep options open but mean more frequent fees and remortgaging, and exposure to rates when the deal ends.
- Longer deals (five years or more) give longer certainty and, with some lenders, can increase how much you can borrow because of how the affordability stress test applies. But ERCs often last the full term, so they are costly if you move and cannot take the mortgage with you ("port" it).
Think about your plans: a move, a growing family, a change of job or a likely fall in income during the deal.
A step-by-step way to decide
- Work out your maximum comfortable payment. Could you cope if a tracker rose by 1–2 percentage points?
- Consider your plans over the next two to five years.
- Compare total cost over the deal period, including arrangement fees, not just the headline rate.
- Read the ERC and portability terms.
- Check overpayment allowances: many deals allow you to overpay up to 10% of the balance a year without charge.
- Get advice if unsure: a mortgage broker or adviser must recommend a suitable product for your circumstances.
A word on predicting rates
No one reliably knows where interest rates will go. Fixed rates on offer already reflect lenders' expectations of future rates. Choose the option you can afford if things go against you, rather than betting on a forecast.
Frequently asked questions
Can I switch from a tracker to a fix mid-deal?
Sometimes, and some trackers have no ERCs to allow this. Check your terms.
What happens when my fix ends?
You move to the SVR unless you arrange a new deal. Start looking three to six months before the end date.
Sources and further reading
- Bank of England: Bank Rate
- FCA Handbook: MCOB 11 (responsible lending)
- MoneyHelper: mortgages guidance
Facts checked on 20 October 2026. Spotted an error? Tell us and we will correct it.