When a mortgage deal comes up for renewal, the choice usually comes down to two camps: lock in a fixed rate, or take a tracker that moves with the Bank of England base rate. Neither is right or wrong — they suit different nerves and different budgets.
The fixed rate
A fixed deal locks your interest rate for a set period, commonly two or five years. Your monthly payment stays the same whatever happens to interest rates. You are buying certainty: you know exactly what you owe each month and can budget around it. The trade-off is that if rates fall, you do not benefit, and leaving early usually means an early repayment charge.
The tracker
A tracker follows the base rate plus a fixed margin, so your payment rises and falls as the base rate moves. If rates drop, you pay less almost immediately. If they rise, your payment goes up — sometimes uncomfortably. Trackers often have more flexibility and may let you overpay or leave without penalty.
Which fits you?
- Choose a fix if a rising payment would stretch your budget, or you simply value knowing the number.
- Consider a tracker if you have headroom to absorb increases and think rates may fall.
The honest truth
Nobody reliably predicts interest rates, including the experts. So the better question is not "where are rates heading?" but "could my household cope if payments rose?" If the answer is no, certainty is worth paying a little for. Match the deal to your budget's resilience, not to a forecast.