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Should I Get a Tracker or Fixed Rate Mortgage in 2024?

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    After interest rate hikes by the Bank of England during 2023, we now see a plateau. The base rate now sits at 5.25% and has remained that way since September 2023, signaling an end to increasing mortgage rates. Many homeowners and prospective buyers are left questioning what this means for their mortgages in 2024, especially with higher mortgage interest rates driving up costs. It is therefore essential that consumers get mortgage products provided with the lowest interest rates.

    Understanding Your Mortgage Options: Tracker vs Fixed-Rate

    When evaluating Tracker vs Fixed Mortgage options, understanding the distinctions and implications of each choice is crucial given the dynamic economic environment. This section delves into the specifics of each option, helping you navigate the complexities of the mortgage market in 2024.

    What is a Tracker Mortgage?

    A tracker mortgage is a type of variable-rate mortgage where the interest rate is tied to the Bank of England’s base rate. This means your mortgage payments can fluctuate:

    • Potential Savings: When the base rate falls, so do your payments, offering a chance for savings.
    • Risk of Increase: Conversely, if the base rate rises, your payments will increase accordingly.

    What is a Fixed-Rate Mortgage?

    In contrast, a fixed-rate mortgage locks in your interest rate for a set period (typically 2, 3, 5, or 10 years). This offers:

    • Stability: Your monthly repayments remain constant throughout the term, unaffected by market fluctuations, aiding in budget planning.
    • Missed Opportunities: However, if market rates fall, you won’t benefit from reduced repayments.

    Making the Right Choice

    In the current economic climate, with interest rates and market conditions constantly changing, choosing the right type of mortgage is more crucial than ever. Here’s what to consider:

    • Tracker Mortgages: Suitable if you’re prepared for potential rate fluctuations and willing to take the risk for possible lower rates.
    • Fixed-Rate Mortgages: Ideal if you prefer predictable repayments and financial stability, especially during times of economic uncertainty.

    Both options have their unique advantages and challenges. Your decision should align with your financial goals, risk tolerance, and the current economic indicators.

    Choosing a Tracker or Fixed Rate Mortgage in 2024

    In 2024, selecting the right mortgage whether it’s a tracker or fixed-rate mortgage is crucial, influenced by the Bank of England base rate and current mortgage market trends. 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 interest 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, getting the choice right when choosing between tracker and fixed-rate mortgages is vital. 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 Pros and Cons

    In the face of fluctuating economic conditions, choosing between a fixed or tracker mortgage can be a pivotal decision. Before we explore each option in detail to help you navigate this important choice, below we have a graph to help.

    Trends in Base Rate and Tracker Mortgage Rates

    Our graph presents a clear overview of the trends in the Bank of England’s base rate alongside tracker mortgage rates from April 2008 to November 2023. This visual representation helps in understanding how the tracker rates, typically set at 1.5% above the base rate, have fluctuated over time in response to changes in the base rate.

    Deciding to Fix Your Mortgage Rate

    For many homeowners, fixing their mortgage rate is a sensible choice. A fixed-rate mortgage provides the certainty of knowing your exact monthly payments. This 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:

    Fixed Rate Advantages:

    • Predictability: With a fixed-rate mortgage, your monthly payments are set, providing stability for budgeting.
    • Beneficial rates during the incentive period: During your incentive period, you’ll typically have access to lower rates than if you were on your lender’s SVR.
    • Rate security: If you secure a fixed-rate deal when interest rates are low, your mortgage lender can’t increase your rates even if interest rates rise in the future.

    Fixed Rate Disadvantages:

    • Early repayment charges: Should you choose to exit your mortgage early, an early repayment charge could apply. This should be taken into consideration if selling your property soon is part of your plans.
    • Possibly higher rates: Based on market conditions and interest rate changes, you may end up paying slightly higher rates than with variable-rate products, particularly if rates decrease.
    • No benefit from rate reductions: If interest rates fall, your repayments won’t decrease.

    Your decision ultimately hinges on your risk tolerance. A tracker or discount-rate mortgage could offer lower initial rates, yet there’s the chance your monthly mortgage payments could rise as your balance fluctuates over time. If you have substantial savings, you might decide this risk is worth taking. However, if you’re barely managing your repayments as is, taking such a risk could lead to financial hardship if your repayments increase.

    Deciding to Get a Tracker Mortgage

    Choosing a tracker mortgage is an appealing option for many homeowners. Tracker mortgages provide the potential of lower interest rates by following the Bank of England base rate; however, like all financial decisions, there are both pros and cons to take into account before making your choice.

    Tracker Rate Advantages:

    • Potential for lower rates: Tracker mortgages can offer lower interest rates, especially when the base rate is low.
    • Benefit from rate reductions: If the base rate falls, your interest rate and mortgage repayments will decrease too.
    • Transparency: Tracker rates are directly linked to the Bank of England base rate, which is publicly available and not set by your mortgage provider.

    Tracker Rate Disadvantages:

    • Rate variability: Your interest rate and monthly repayments can go up as well as down on a variable-rate mortgage. If the base rate increases, so will your mortgage repayments.
    • Uncertainty: With an adjustable-rate mortgage, monthly repayments may change from month to month, making budgeting more complex.
    • Potential higher costs: Should the base rate increase significantly, you could pay more than expected on a fixed-rate deals.

    Decisions on tracker mortgages ultimately depend on your personal circumstances and risk tolerance. If you can accept fluctuating repayments as long as base rates stay low, then tracker loans could be suitable; otherwise, fixed-rate deals may provide greater certainty of payments without the risk of rising rates.

    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.

    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 in order 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. Yet since the base rate has remained the same level as we close 2023.

    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 repayments on typical 25-year loans 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

    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 Bank of England base rate.
    Coventry Building Society Tracker Mortgages Linked to the Bank of England 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 Skitpon 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 start to improve. 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 taking less long-term fixed rates 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.

    Switching to a fixed mortgage can offer stability against rising rates. Consider your risk tolerance and market predictions before changing.

    The choice depends on your risk comfort and financial stability. Fixed mortgages offer certainty, while variable mortgages may offer savings if rates fall.

    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.

    People choose tracker mortgages for potentially lower rates when the base rate decreases and the flexibility to benefit from market changes.

    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

    Tracker mortgage rates vary. They are typically set at a percentage above the Bank of England base rate, changing with 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.

    Tracker mortgage rates rise and fall with the base rate. If the base rate increases, tracker rates will likely follow.

    Mortgage rates in 2024 depend on economic conditions and central bank policies. It's best to stay informed about market trends.

    Conclusion

    Your choice between a fixed-rate, tracker, or flexible mortgage depends on your financial situation, risk tolerance, and expected interest rate changes in the future. By researching and seeking professional mortgage advice about each option available to you, it will enable you to make an informed decision that best serves your needs.

    Be mindful that the mortgage market is constantly shifting and evolving, making it essential to regularly evaluate your mortgage arrangements to make sure they still fit with your circumstances.

    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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