How fixed rate mortgages work
A fixed rate mortgage locks your interest rate for a set period — typically 2, 3, 5, or 10 years. During this period, your monthly payment stays exactly the same regardless of what happens to the Bank of England base rate or general interest rate conditions. At the end of the fixed period, your mortgage reverts to the lender's Standard Variable Rate (SVR) unless you remortgage or take a new product.
Fixed rates give certainty. You know exactly what your payment will be throughout the fixed period, making budgeting straightforward. This is particularly valuable for first time buyers adjusting to homeownership costs, or households with tight monthly budgets.
How tracker mortgages work
A tracker mortgage has an interest rate that moves in line with the Bank of England base rate, at an agreed margin above it — for example, base rate + 0.5%. When the base rate rises, your rate (and monthly payment) rises the following month. When the base rate falls, your payment falls too.
Tracker mortgages are variable by nature — your payment can go up or down over the course of the deal. Most trackers do not have Early Repayment Charges (ERCs), meaning you can overpay or exit the deal without penalty. This flexibility can be valuable in a falling rate environment.
The 2026 rate environment: what to consider
The Bank of England base rate stood at 3.75% in April 2026, having been held at that level in March 2026 following a series of cuts from the post-2022 peak of 5.25%. Market expectations point to possible further gradual cuts later in 2026 and into 2027, though the pace will depend on inflation, wage growth, and global economic conditions.
In this environment, tracker mortgages have become more attractive relative to their historical norm — particularly for borrowers who expect the base rate to fall further and who can absorb some payment variability. However, if further cuts are slower or smaller than expected, a fixed rate could prove better value.
Fixed rate: pros and cons
Choosing a fixed rate mortgage offers the following advantages and disadvantages:
Advantages of fixing
- Complete payment certainty for the fixed period
- Protection against unexpected rate rises
- Easier to budget — particularly valuable for first time buyers
- Competitive rates currently available from 90+ lenders
- Suitable for longer-term planning (especially 5-year fixes)
Disadvantages of fixing
- Early Repayment Charges (ERCs) typically apply if you exit early or overpay beyond the allowed limit
- You will not benefit if rates fall during the fixed period
- Two-year fixes can mean returning to the market more frequently, with associated fees
- Breaking the fix early (e.g. to move home or remortgage) can be expensive
Tracker rate: pros and cons
Choosing a tracker mortgage has these advantages and disadvantages:
Advantages of tracking
- You benefit immediately when the base rate falls
- Most trackers have no Early Repayment Charges — full flexibility
- Often better short-term value than fixed rates during periods of falling rates
- Can overpay or exit without penalty in most cases
Disadvantages of tracking
- Payments can rise if the base rate increases
- Less certainty — harder to budget in a volatile rate environment
- Rate rises can happen faster than anticipated
- Not suitable for borrowers with very tight monthly budgets
Which type suits you?
If you need payment certainty — because of a tight budget, a fixed monthly income, or simply the peace of mind of knowing your exact payment — a fixed rate is usually the right choice. A five-year fix in particular suits buyers who want to set their mortgage and not think about it for a meaningful period.
If you have flexibility in your monthly budget, are comfortable with some payment variability, and believe rates are likely to fall significantly in the near term, a tracker could be more cost-effective. Trackers are also well-suited to borrowers who may want to overpay or sell within the next 1–3 years, where the absence of ERCs is valuable.
A whole-of-market broker can model both scenarios against current available rates and your specific circumstances — giving you a clear comparison before you decide.
Roger Iyamu
CeMAP Qualified Mortgage Adviser | FCA Regulated
Roger has over 15 years of experience as an independent mortgage adviser. CeMAP qualified and FCA regulated, he specialises in complex mortgage cases including self-employed applicants, portfolio landlords, expat mortgages and high-value purchases across Greater London and the Home Counties.
All advice provided by Mortgage International is given by CeMAP qualified advisers regulated by the Financial Conduct Authority.