Mortgage 5 min read • March 2026

There are three main types of mortgage interest rate available in the UK. Each behaves differently when Bank Rate moves, and each comes with a different trade-off between certainty and flexibility.

Fixed-rate mortgages

Your interest rate is fixed for a set period — typically 2, 3, or 5 years — regardless of what happens to the Bank of England base rate. After the fixed period, the mortgage automatically reverts to the lender's Standard Variable Rate (SVR) unless you remortgage.

Key features:

• Monthly payments are predictable throughout the fixed period
• Early Repayment Charges (ERCs) typically apply if you overpay beyond the permitted annual limit (usually 10% of the outstanding balance per year) or if you leave the deal early
• ERCs are commonly 1–5% of the outstanding balance, reducing as the fixed period progresses
• 5-year fixes generally carry slightly higher rates than 2-year fixes, reflecting the longer certainty period

Tracker mortgages

The rate is set at a fixed margin above (or occasionally below) the Bank of England base rate. If base rate is 4.5% and you have a tracker at base rate + 1.5%, your mortgage rate is 6%. If base rate falls to 4%, your rate falls to 5.5%.

• Payments move up and down with base rate decisions
• Some trackers have a floor (a minimum rate below which they cannot fall) — check the small print
• Trackers often have lower or no ERCs, particularly lifetime trackers, giving more flexibility
• Introductory trackers typically last 2 years; lifetime trackers run for the mortgage term

You can check the current Bank of England base rate at bankofengland.co.uk.

Standard Variable Rate (SVR)

The SVR is each lender's default rate — the rate you automatically pay once a fixed or tracker deal ends. It is set entirely at the lender's discretion and is typically 2–4 percentage points above the Bank of England base rate. In practice, SVRs have often been in the 7–8% range when base rate was around 4–5%.

SVRs are almost always more expensive than available remortgage products. The period spent on an SVR waiting to remortgage is referred to as the "SVR trap" — every month you delay costs you the difference between the SVR and the best available rate.

There are no ERCs on the SVR — you can switch or overpay freely — but the high rate typically outweighs this flexibility.

Variable rate (discounted)

A discounted variable rate is a set discount off the lender's SVR for a fixed period. Unlike a tracker, it does not follow base rate directly — it follows the SVR. If the lender changes their SVR independently of base rate, your rate changes too.

How to think about the choice

The choice between fixed and tracker is essentially a question about certainty vs flexibility, not about predicting rate movements:

• Fixed suits those who value payment certainty, are budgeting tightly, or would struggle if rates rose
• Tracker suits those who believe rates will fall during the deal period and want to benefit from that, or who value flexibility (e.g. may want to overpay significantly or move soon)
• Longer fix (5-year) provides certainty over a longer period but typically costs more upfront in rate terms; well-suited to those who want to "set and forget" for a longer period