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A Tracker or Fixed Mortgage 2024: What’s Best?

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    After interest rate hikes by the Bank of England during 2023, we now see a plateau going into 2024. The base rate now sits at 5.25% and has remained that way since September 2023, signalling an end to increasing rates for tracker or fixed mortgages. Many homeowners and prospective buyers are left questioning what this means for their mortgages in 2024, especially with higher mortgage interest rates and external interest rates driving up costs. It is therefore essential that you get a tracker or fixed mortgage product with the lowest interest rates and consider the benefits of securing a deal early.

    What is a Tracker Mortgage?

    A tracker mortgage is a type of variable-rate mortgage that adjusts according to the Bank of England (BoE) base rate, potentially offering a better mortgage deal when rates decrease. When the BoE rate changes, so does your mortgage interest rate, affecting your monthly mortgage payments. Lenders add a fixed percentage to the base rate, determining your total interest. To limit fluctuation, some tracker mortgages feature a cap (maximum rate) or collar (minimum rate), ensuring your rate stays within a predefined range, and offering predictability amidst rate variability.

    What is a Fixed-Rate Mortgage?

    Fixed-rate mortgages work by fixing an interest rate so it remains consistent over their entire duration, usually 2,3,5 or 10 years. This ensures financial predictability and stability by shielding borrowers from rising interest rates, thus facilitating easier budgeting. However, if rates significantly decline, borrowers might find themselves paying more in interest compared to variable-rate mortgages. Nonetheless, when your current fixed-rate mortgage term ends, you have the opportunity to remortgage to secure a new deal at a better rate.

    Fixed vs Tracker Mortgage: The Pros & Cons

    In the current economic climate, evaluating your current deal, whether it’s fixed-rate or tracker, is more crucial than ever. Here’s what to consider:

    Fixed-rate Mortgage Pro & Cons

    For many homeowners, fixing their mortgage rate for a set fixed term is a sensible choice, offering financial predictability. A fixed-rate mortgage provides the certainty of knowing your exact monthly payments. A fixed term can be a relief, especially when compared to the variable rates of your mortgage lender’s Standard Variable Rate (SVR). However, like all financial decisions, there are advantages and disadvantages to consider:

    Pros:

    • Your monthly repayments stay the same even if the base rate rises, making budgeting simpler for those with fixed-rate mortgages.
    • Fixed rates often offer better value than a lender’s standard variable rate (SVR).
    • Provides financial stability as your mortgage payment remains constant during the deal’s set period.

    Cons:

    • It won’t benefit from lower mortgage repayments if the base rate falls, a consideration for those contemplating fixed-rate mortgages
    • Early repayment charges (ERC) may apply if you switch deals prematurely.

    Tracker-rate Mortgage Pro & Cons

    Choosing a tracker mortgage provides the potential of lower rates of interest by following the Bank of England (BOE) base rate, contrasting with the stability of a fixed rate term. However, like all financial decisions, there are advantages and disadvantages to consider, especially when comparing fixed-rate mortgages to variable rate options.

    Pros:

    • Payments decrease when the BOE lowers the base rate, potentially offering a cheaper rate than fixed mortgages in certain market conditions.
    • Tracker rates can have better interest rates than a lender’s standard variable rate.
    • Sometimes cheaper than a fixed rate mortgage, offering potential savings, but not when the base rate is high as we see in 2024, which is why it’s vital to choose wisely to save money.

    Cons:

    • Payments increase if the bank of England raises the base rate, affecting both tracker and fixed mortgage holders.
    • A rate collar may limit the benefits of significant base rate cuts, potentially resulting in a higher rate than expected.
    • Switching deals early may incur early repayment charges (ERC), making it an expensive deal if not calculated properly.

    Choosing a Fixed or Tracker Mortgage in 2024

    In 2024, selecting the right mortgage, whether it’s a new deal in fixed or tracker mortgages, is crucial. A fixed-rate mortgage offers stability, ideal for consistent budgeting, while a tracker mortgage, tied to economic indicators, suits those prepared for rate fluctuations. Your choice should consider rate mortgage products, potential tracker mortgage comeback, and current economic indicators, aligning with your financial goals and risk tolerance. It’s vital to stay updated on mortgage rates and market shifts. Consulting a mortgage broker can provide personalised mortgage advice, ensuring you make an informed decision tailored to your unique situation.

    “In 2024, and reflecting on the past year, with interest rates and market conditions constantly changing, choosing the right type of mortgage is more crucial than ever. Considering the Bank of England’s base rate and the mortgage market’s current state is key. At YesCanDo Money, we aim to demystify this process, providing clear, personalised mortgage advice. Whether it’s the stability of a fixed-rate mortgage or the flexibility of a tracker, our focus is on aligning with our clients’ financial goals for their long-term benefit.” – Steve Roberts, founder of YesCanDo Money.

    Not sure where to start?
    Talk to our team about which mortgage type is best for you. Our team of mortgage experts are here to guide you every step of the way. Contact us today for to get started, we're friendly, experienced and fee-free.

    Tracker vs Fixed Mortgage: Current Rates

    Navigating the mortgage landscape can be complex, with tracker and fixed mortgage rates offering distinct advantages and challenges. Let’s compare tracker vs fixed mortgage rates for February 2024, below is a snapshot of the current best rates for both:

    Fixed Rate Deals: Current Interest Rates

    Below are the current best interest rates as of 5th June 2024 for fixed-rate mortgages 90% LTV (Loan to Value) and 70% LTV, based on a 30-year mortgage term, for 2-year, 3-year, and 5-year fixed terms. Please note, that actual rates can vary by lender and individual circumstances.

    Swipe left to see more of the table ➡️

    Best 90% Loan To Value Fixed-Rate Interest Rates (5th June 2024)
    Lender Type Initial Rate Initial Payment Reverting Rate Reverting Payment Total Fees APRC Total Cost
    Virgin Money 2 Year Fixed 2.73% £1,035.65 9.24% £1,858.66 £1,234 8.3% £25,939
    Furness Building Society 2 Year Fixed 2.75% £1,038.04 8.69% £1,753.85 £1,019 7.3% £25,782
    Barclays 2 Year Fixed 4.80% £1,289.24 8.74% £1,749.37 £1,034 7.2% £40,664
    Virgin Money 3 Year Fixed 3.88% £1,172.78 9.24% £1,789.51 £1,234 7.1% £50,584
    Barclays 3 Year Fixed 4.80% £1,289.24 8.74% £1,749.37 £1,034 7.2% £55,925
    HSBC 3 Year Fixed 4.90% £1,302.25 6.99% £1,540.71 £1,516 6.3% £52,180
    Virgin Money 5 Year Fixed 3.88% £1,172.78 9.24% £1,789.51 £1,234 7.1% £71,450
    Barclays 5 Year Fixed 4.80% £1,289.24 8.74% £1,749.37 £1,034 7.2% £86,415
    HSBC 5 Year Fixed 4.90% £1,302.25 6.99% £1,540.71 £1,516 6.3% £79,651

    The fixed-rate mortgage rates below are based on purchasing a property worth £250,000 with a £225,000 mortgage over 25 years, representing a 90% Loan to Value (LTV) ratio. Keep in mind, that actual rates and terms can differ due to individual financial situations and market changes.

    Best 70% LTV Fixed-Rate Mortgage Deals (5th June 2024)
    Lender Type Initial Rate Initial Payment Reverting Rate Reverting Payment Total Fees APRC Total Cost
    Virgin Money 2 Year Fixed 1.93% £735.80 9.24% £1,435.84 £1,234 8.1% £18,742
    Furness Building Society 2 Year Fixed 2.25% £763.32 8.69% £1,358.69 £1,019 7.2% £19,189
    Barclays 2 Year Fixed 4.44% £966.76 8.74% £1,352.09 £934 7.0% £30,896
    Virgin Money 3 Year Fixed 3.42% £868.60 9.24% £1,379.99 £1,234 7.0% £37,988
    Barclays 3 Year Fixed 4.44% £966.76 8.74% £1,352.09 £934 7.0% £42,327
    HSBC 3 Year Fixed 4.53% £975.69 6.99% £1,190.94 £1,516 6.2% £39,573
    Virgin Money 5 Year Fixed 3.42% £868.60 9.24% £1,379.99 £1,234 7.0% £53,199
    Barclays 5 Year Fixed 4.44% £966.76 8.74% £1,352.09 £934 7.0% £65,163
    HSBC 5 Year Fixed 4.53% £975.69 6.99% £1,190.94 £1,516 6.2% £60,057

    The fixed-rate mortgage rates below are based on purchasing a property worth £250,000 with a £175,000 mortgage over 25 years, representing a 70% Loan to Value (LTV) ratio. Keep in mind, that actual rates and terms can differ due to individual financial situations and market changes.

    Tracker Rate Deals: Current Interest Rates

    Below are the current best interest rates as of 5th June 2024 for tracker-rate mortgages 90% LTV (Loan to Value) and 70% LTV, based on a 30-year term, for 2-year, 3-year, and 5-year fixed terms. Please note, that actual rates can vary by lender and individual circumstances.

    Swipe left to see more ➡️

    Best 90% Loan To Value Tracker-Rate Interest Rates (5th June 2024)
    Lender Type Initial Rate Initial Payment Reverting Rate Reverting Payment Total Fees APRC Total Cost
    Newcastle Building Society 2 Year Tracker 5.95% £1,442.81 6.94% £1,572.11 £2,289 7.0% £37,046
    HSBC 2 Year Tracker 6.14% £1,468.99 6.99% £1,581.90 £1,016 7.1% £35,772
    NatWest 2 Year Tracker 6.18% £1,474.54 8.24% £1,753.03 £1,025 8.1% £36,956
    Co-operative Bank 3 Year Tracker 6.44% £1,510.79 6.44% £1,510.79 £999 6.7% £55,487
    West One 3 Year Tracker 9.15% £1,911.36 9.15% £1,911.36 £2,315 9.7% £71,299
    Co-operative Bank 5 Year Tracker 6.44% £1,510.79 6.44% £1,510.79 £999 6.7% £91,746
    West One 5 Year Tracker 9.15% £1,911.36 9.15% £1,911.36 £2,315 9.7% £117,172

    The tracker-rate mortgage rates below are based on purchasing a property worth £250,000 with a £225,000 mortgage over 25 years, representing a 90% Loan to Value (LTV) ratio. Keep in mind, that actual rates and terms can differ due to individual financial situations and market changes.

    Best 70% LTV Tracker-Rate Mortgage Deals (5th June 2024)
    Lender Type Initial Rate Initial Payment Reverting Rate Reverting Payment Total Fees APRC Total Cost
    HSBC 2 Year Tracker 5.54% £1,078.84 6.99% £1,226.24 £1,016 7.0% £26,408
    Halifax 2 Year Tracker 5.58% £1,081.91 8.74% £1,411.74 £1,099 8.4% £27,406
    Nationwide 2 Year Tracker 5.59% £1,084.08 7.99% £1,333.41 £1,014 7.8% £26,597
    Co-operative Bank 3 Year Tracker 6.24% £1,153.34 6.24% £1,153.34 £999 6.5% £42,619
    Barclays 3 Year Tracker 6.25% £1,154.42 8.74% £1,394.72 £1,034 7.9% £42,673
    Precise Mortgages 3 Year Tracker 6.79% £1,213.52 6.79% £1,213.52 £3,990 7.3% £47,432
    Co-operative Bank 5 Year Tracker 6.24% £1,153.34 6.24% £1,153.34 £999 6.5% £70,299
    Barclays 5 Year Tracker 6.25% £1,154.42 8.74% £1,394.72 £1,034 7.9% £70,379
    Precise Mortgages 5 Year Tracker 6.79% £1,213.52 6.79% £1,213.52 £3,990 7.3% £76,556

    The tracker-rate mortgage rates below are based on purchasing a property worth £250,000 with a £175,000 mortgage over 25 years, representing a 70% Loan to Value (LTV) ratio. Keep in mind, that actual rates and terms can differ due to individual financial situations and market changes.

    The Current Mortgage Landscape – Will Interest Rates Rise?

    The Bank of England estimates that inflation reached its annual peak near the end of 2022, driven by energy and food price increases, reaching 8.7%. When inflation exceeds 2%, interest rates will typically be raised to try and bring it under control; interest rate rises have occurred regularly since December 2021.

    On the 3rd of August 2023 the base rate increased from 5% to 5.25%; this mark represented inflation reaching its highest level since 2008. Since the base rate rose to 5.25% it has remained the same level half way through 2024. Leaving the question, what will the base rate do next?

    The base rate rises have had serious repercussions for the mortgage market, with lenders withdrawing hundreds of mortgage deals and increasing fixed-rate interest rates by up to between 5 and 6%. This has increased monthly mortgage payments on typical 25-year mortgage by £68 per £100,000.

    For current mortgage rate predictions read our guide on Will mortgage rates go down in 2024 UK?

    Not sure where to start?
    Talk to our team about which mortgage type is best for you. Our team of mortgage experts are here to guide you every step of the way. Contact us today for to get started, we're friendly, experienced and fee-free.

    Mortgage Lenders with Flexible Mortgages

    Torn between choosing a fixed or tracker mortgage? Offering a best-of-both-world scenario, a flexible mortgage could be a great choice for you. Flexible mortgages give you greater control over how to repay your loan, potentially saving money while giving you greater payment flexibility depending on your current circumstances. They allow for overpayments on your mortgage with no early repayment charge which helps reduce balances more quickly while paying less interest overall.

    Below we list some of the mortgage lenders that offer some flexibility on their fixed-rate and tracker-rate mortgages.

    Lender Mortgage Type Key Features
    NatWest Tracker Switch The NatWest ‘Track and Switch’ option, switch from tracker to fixed-rate after three months without a re-credit check.
    Nationwide Tracker Mortgages No Early Repayment Charges for deals reserved after May 2, 2014, allowing overpayments or early payoff.
    Leeds Building Society Fixed-Rate Mortgages Allows unlimited overpayments without Early Repayment Charges, combining rate stability with payment flexibility.
    Newcastle Building Society and Kent Alliance Discount Mortgages Offer discount mortgages without Early Repayment Charges, enabling lower initial payments and flexible overpayments.
    Barclays Tracker Mortgages  Tracker mortgages with no redemption fees, payments adjust with the BOE base rate.
    Coventry Building Society Tracker Mortgages Linked to the BOE base rate, no Early Repayment Charges, offering payment flexibility.
    HSBC Tracker Mortgages HSBC Tracker Mortgages no Early Repayment Charges, allows for overpayments or early payoff for homeowners.
    Skipton Building Society Tracker Mortgages Skipton Tracker mortgages without Early Repayment Charges, enabling overpayments and faster debt reduction.
    TSB Tracker Mortgages Allows overpayments or early payoff without Early Repayment Charges, known for customer-focused service.
    Not sure where to start?
    Talk to our team about which mortgage type is best for you. Our team of mortgage experts are here to guide you every step of the way. Contact us today for to get started, we're friendly, experienced and fee-free.

    FAQs

    With inflation decreasing it will only be a matter of time before interest rates fall. Although this will often take several months the chances are that we will see interest rates and mortgage rates start to decrease in 2024.

    Whether a fixed or variable mortgage is right for you will depend on your attitude to risk and how tight your finances are. We are seeing an increase in tracker deals and our clients are less open to a fixed rate deal as we move towards the end of 2023.

    Tracker mortgages can be beneficial if you anticipate that the base rate will decrease, offering potential savings. But they involve risk if rates rise; currently, it appears the base rate has plateaued and inflation remains under control; this trend suggests tracker mortgage rates might remain stable, although economic indicators could potentially change interest rate trends over time.

    Predicting interest rates is challenging. They depend on economic factors and the Bank of England's policies. Monitor market trends for insights.

    A tracker mortgage may be better if you can handle rate fluctuations and anticipate base rate drops. Fixed rates offer predictable repayments.

    Staying on a tracker mortgage is beneficial if you anticipate a decrease in interest rates and are comfortable with potential rate variability.

    Choose based on your financial plans. A 2-year fixed offers short-term stability, while a 5-year fixed rate deals provide longer-term rate security. Learn more here 2 or 5 Year Fixed Mortgage: The Best Choice for You

    As of February 2024, tracker mortgage rates for a 90% LTV start at 6.04% and 5.54% for a 70% LTV, influenced by the Bank of England's base rate of 5.25%. Rates vary based on financial circumstances and market conditions.

    Yes, tracker mortgage rates are usually set around 1.5% above the Bank of England base rate and adjust in line with its changes.

    Working with a Mortgage Broker to Make the Best Decision for You

    Selecting the right option among fixed-rate, tracker, or flexible mortgages is contingent on your financial situation, risk tolerance, and expectations for future interest rate movements. Partnering with a mortgage broker can clarify these options, helping you to make a well-informed decision that best fits your unique circumstances.

    Keep in mind, that the mortgage market is constantly in flux. Staying in regular touch with your mortgage advisor is crucial to ensure that your mortgage plan remains aligned with your changing needs and the latest market trends.

    Disclaimer: Please keep in mind that the information in this article should only be taken as educational and should not be seen as financial advice.

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    Grant Humphries (CeMAP)
    Grant Humphries (CeMAP)

    Grant Humphries (CeMAP) is a proficient Mortgage & Protection Adviser at YesCanDo Money. With a career spanning since 2001, Grant has honed his expertise in understanding lenders' criteria, complex financial situations, and the nuances of the mortgage market. His deep knowledge enables him to provide tailored solutions, especially for professionals and those with unique financial profiles. At YesCanDo, Grant's commitment to excellence is evident. He takes pride in guiding clients through their mortgage journey, ensuring they feel confident and informed at every step. From first-time buyers to seasoned investors, Grant's analytical approach and dedication make him a trusted adviser in the financial landscape

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