As we get further into 2025, the mortgage and property markets continue to evolve, presenting homeowners and prospective buyers with a crucial decision – should you get a fixed, variable, or tracker mortgage? Interest rates have seen significant movement over the last 12 months, with many mortgage rates falling along with the Bank of England Base Rate. This climate of shifting rates and lender competition makes understanding your options as important as ever. In this guide, we’ll explain the main types of mortgages as well as their advantages and disadvantages. We’ll also look at when each product may be suitable so you can get an idea before speaking to a mortgage broker.
What is a Fixed-rate Mortgage?
A fixed-rate mortgage is a type of mortgage where the interest rate you pay remains the same for a specific period of time. The fixed-rate period, or introductory period, is typically 2, 5 or 10 years, though some lenders offer other options. During your fixed-rate period, your monthly repayments will stay the same and you’ll be shielded from any rate changes in the wider economy (such as the Bank of England base rate). This makes it easier to budget for your mortgage and provides greater security than other mortgage products. On the downside, these mortgages are less flexible and you may have to pay an Early Repayment Charge if you wish to remortgage or pay off the loan early. As a general rule of thumb, longer fixes provide greater security but less flexibility. To learn more about the different lengths of fixed-rate mortgages, please read our guide, ‘How Long Should I Fix My Mortgage for in 2025?’
What are the Pros & Cons of Fixed-rate Mortgages?
Advantages of Fixed-rate Mortgages
- Consistent Repayments. The biggest benefit of fixed-rate mortgages is knowing exactly what your monthly repayments will be. This makes budgeting and financial planning much simpler.
- Protection from Rate Rises. If general interest rates in the UK rise (e.g. the Bank of England increases its Base Rate), your mortgage repayments will be unaffected during your fixed-rate period.
- Security & Peace of Mind. Due to the two points outlined above, fixed-rate mortgages can provide a sense of stability and relieve financial anxieties or worries.
- Usually Cheaper Than the SVR. Fixed rates are usually more competitive than a lender’s Standard Variable Rate (SVR), which you’d typically revert to if you don’t secure a new deal at the end of your fixed term.
Disadvantages of a Fixed-rate Mortgages
- Miss Out on Rate Falls. If interest rates in the UK fall during your fixed term, your mortgage repayments will remain the same. To benefit from the lower rates immediately, you may have to pay an Early Repayment Charge.
- Early Repayment Charges (ERCs). If you want to repay your mortgage in full, switch to a different deal, or move house (without ‘porting’ your mortgage) during your fixed-rate period, you may have to pay an ERC.
- Potentially Higher Initial Rates. Sometimes, especially in periods where interest rates are low, fixed rates might be higher than some variable rate options due to the security they provide.
- Overpayment Limits. Most fixed-rate mortgages have limits on how much you can overpay each year without incurring a charge (typically around 10% of the outstanding balance). You can learn more about overpaying your mortgage by reading our guide, ‘What Are the Advantages & Disadvantages of Paying off My Mortgage?’
What is a Variable-rate Mortgage?
A variable-rate mortgage is a type of mortgage where the interest rate you pay may go up or down. This means that the amount you pay each month could also increase or decrease at any time. When we refer to variable mortgages, we are often talking about Standard Variable Rate (SVR) mortgages. Borrowers are usually moved onto the SVR at the end of a fixed-rate deal (if they fail to remortgage). The SVR is typically the highest rate you can be on with your lender, so these mortgages are rarely recommended unless you need a large amount of flexibility for a short period of time (eg. you’re about to receive an inheritance that you’ll use to pay off your mortgage in full). Another type of variable mortgage is called a tracker mortgage, which are generally preferable to SVR mortgages. We’ll discuss tracker mortgages a bit later.
What are the Pros & Cons of Variable-rate Mortgages?
In this breakdown, we’ll specifically be referring to Standard Variable Rate mortgages. Scroll down to see the pros and cons of tracker mortgages.
Advantages of Standard Variable-rate Mortgages
- Greatest Level of Flexibility. With an SVR mortgage, you are moved onto your lender’s default rate but you are not locked into a specific deal. Therefore, they are extremely flexible, meaning you can move to a new lender or deal at any time without incurring a charge.
- Potential Benefit From Rate Falls. Your lender’s SVR may fall at any time, either due to economic factors or at your lender’s discretion. If this happens, your monthly repayments will also fall (but they may still be higher than fixed or tracker rates).
- Convenient and Cheap Initially. As you are simply being moved onto your lender’s default rate, there is no application process, no credit or affordability checks, and no product fees with SVR mortgages.
Disadvantages of Standard Variable-rate Mortgages
- Higher Interest Rates. The SVR is typically the highest rate you can be on with your lender. Therefore, you’ll usually be able to save money by switching to a fixed or tracker mortgage.
- Lender Can Increase Rate. Unlike fixed-rate or tracker mortgages, your lender can increase the SVR at any time, independent of the Base Rate, economy or the wider market.
- Unpredictable Repayments. As your lender can increase or decrease the SVR at any time, your monthly repayments can also go up or down without much warning.
- Less Security & Peace of Mind. The last two points may lead to financial worries, especially if you would struggle to afford your mortgage if it increased.
What is a Tracker Mortgage?
A tracker mortgage is a type of variable mortgage, where the interest rate you pay may go up or down during your deal. However, unlike the Standard Variable Rate, your lender cannot change a tracker rate at their own discretion. Instead, a tracker mortgage ‘tracks’ or follows another interest rate, typically the Bank of England’s (BoE) Base Rate. Your mortgage rate will be set at a certain percentage above the BoE Base Rate. For example, if your tracker deal is “Base Rate + 1%”, and the Base Rate is currently 4.25%, your tracker rate would be 5.25%. If the Base Rate were to decrease to 4%, then your tracker rate would decrease to 5%. As with a fixed-rate mortgage, tracker mortgages usually come with a 2-year or 5-year introductory period, after which you’ll have to remortgage or move onto your lender’s SVR.
What are the Pros & Cons of Tracker Mortgages?
Advantages of Tracker Mortgages
- Potential for Lower Payments. If the BoE Base Rate falls, your monthly mortgage repayments will also decrease, potentially saving you money. This is the primary appeal of tracker mortgages, especially when rates are expected to come down in the near to medium term.
- Only Changes When Base Rate Changes. Unlike a lender’s Standard Variable Rate, which can be changed at the lender’s discretion, a tracker mortgage’s rate is directly linked to a publicly known rate (usually the BoE Base Rate), and will only change when that rate changes.
- Potential for Flexibility. Some tracker mortgages, especially “lifetime trackers,” have no Early Repayment Charges (or lower ones compared to fixed-rate deals). This can be beneficial if you plan to move or want to be able to remortgage if rates change significantly.
- “Track and Switch” Options. Some lenders offer “track and switch” mortgage deals, allowing you to start on a tracker and then switch to a fixed-rate mortgage without incurring an ERC if you decide you need more stability down the line.
- Usually Cheaper Than the SVR. Tracker mortgages usually have lower rates than the lender’s Standard Variable Rate, whilst still having many of the same benefits (such as the potential to benefit from rate falls).
Disadvantages of Tracker Mortgages
- Risk of Higher Repayments. If the BoE Base Rate rises, your monthly mortgage repayments will also increase. This can make budgeting difficult and could put a strain on your finances if rates were to climb rapidly.
- Initial Rate Might Be Higher. In some market conditions, the initial interest rate on a tracker mortgage might be higher than the best fixed-rate deals available at that time, especially when the Base Rate is high but expected to fall.
- Potential Early Repayment Charges. While some trackers offer flexibility with maximum costs, many still have ERCs during the introductory period. If you need to remortgage or sell your property before the end of this period, you could face substantial charges.
Should I Get a Fixed-rate, Variable or Tracker Mortgage?
Whether you should get a fixed-rate or tracker mortgage, or even stay on the Standard Variable Rate, depends on your current financial situation, future plans, and general risk tolerance – as well as the general outlook for interest rates in the UK.
In 2025, the BoE Base Rate has been on a downward trend that is expected to continue in the short to medium term. However, any further drops will be gradual and are unlikely to take the Base Rate lower than 3%. It’s also important to remember that most fixed-rate deals have already factored in this downward trend, meaning that holding out for further Base Rate cuts may not result in a cheaper deal (and could cost you more in the long run).
If you value security and predictable monthly repayments, a fixed-rate mortgage is likely to be the right option for you. You can learn more about these products by reading our guide, ‘What is a Fixed-rate Mortgage and Should I Get One?’
If you’d prefer to have a greater level of flexibility, with the potential to benefit slightly if the Base Rate continues to fall, a tracker mortgage may be the right option for you. You can learn more about these products by reading our guide, ‘What is a Tracker Mortgage and Should I Get One?’
If you are currently on your lender’s Standard Variable Rate, it’s nearly always recommended to secure a new fixed-rate or tracker deal as soon as possible. The SVR is usually the highest rate you can be on with your lender, so you should be able to save money by switching to a new deal. There are rare occasions when you may be advised to stay on the SVR for a short period of time, and you can find out more about this by reading our guide, ‘What is a Standard Variable Rate (SVR) Mortgage?’
The information in our guides is meant to give you an overview of the different types of mortgages and when each may be suitable. However, we recommend speaking to one of our friendly advisors who can recommend and find the right deals for you based on your specific circumstances.
The Bottom Line
Fixed, variable and tracker mortgages each have their own advantages and disadvantages. Which is most suitable for you not only depends on current market conditions but also on your circumstances, plans for the future, and what level of risk you’re comfortable with. Generally, if you value stability and security, a fixed-rate mortgage may be most suitable, but what length of fix could depend on your future plans amongst other factors. If you’d like more flexibility (but with added risk) and the option to potentially benefit from Base Rate falls, a tracker mortgage may be more suitable. Staying on your lender’s higher Standard Variable Rate is not usually recommended except in rare situations – such as an imminent drop in fixed rates or if you plan to pay off your mortgage in full and are waiting for funds to clear. Although this guide will give you some guidance on which type of mortgage may be most suitable for you, it’s important you then speak to a mortgage broker to get professional advice based on your specific situation.
At Michael Usher Mortgage Services, we’ve been helping people throughout Surrey, Hampshire and Berkshire for over 30 years! We’re not affiliated with any particular lender, so we can access a comprehensive range of mortgages from across the market to find a deal that suits your needs. We’ll guide you through the process and liaise with your lender, estate agent and solicitor to ensure your application goes as smoothly as possible, and we can also help protect your mortgage with our FREE Insurance Service.
Talk to one of our friendly mortgage advisors for free to get going quickly. Our head office is on Frimley High Street, but we can also help you remotely via phone or video call if you’d prefer. We look forward to chatting with you!
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