Guide · Choosing a rate
Fixed, tracker or variable
This is not a bet on interest rates. It is a question about how much uncertainty you can carry and how likely you are to want out early. Answer those two honestly and the product picks itself.
| Fixed rate | Tracker | Standard variable | |
|---|---|---|---|
| What the rate does | Stays the same for the fixed period | Moves with the Bank of England base rate plus a set margin | Whatever the lender decides |
| Payment certainty | Complete | None | None |
| Early repayment charge | Yes, usually | Sometimes, often none | Never |
| Benefit if rates fall | No | Yes, immediately | In theory |
| Typical cost | Moderate | Similar, sometimes cheaper | The most expensive rate the lender offers |
| Who it suits | Anyone on a budget who wants to sleep | Those with room to absorb a rise, or expecting to repay soon | Nobody, deliberately |
The standard variable rate is not a choice
It is what happens when you do nothing. Your fixed rate ends, the lender moves you onto its standard variable rate, and it is almost always the worst rate that lender has. It exists to catch people who are not paying attention, and it is often two points or more above what you could get.
On a £200,000 balance, two points is roughly £4,000 a year. There is genuinely no cleverer piece of financial advice in this whole guide than: put a reminder in your calendar for six months before your deal ends.
Two years or five?
The five-year fix is usually slightly cheaper per month and buys certainty for longer. So why would anyone take two? Because a five-year fix is a five-year commitment, and life is shorter than that.
Lean towards five years if you are settled in the property, your income is stable, you value predictability, and your loan to value is already good so improving it will not help much.
Lean towards two years if you might move, you expect to borrow more soon, your loan to value is close to a better band and will cross it, your credit is repairing, or your income is about to change significantly.
The mistake is picking on rate alone. The extra you pay for a two-year fix is often less than the early repayment charge you would face for breaking a five-year one, and vastly less than the cost of being unable to move when you need to.
What an early repayment charge actually costs
Typically 1% to 5% of the outstanding balance, usually stepping down by a percentage point for each year that passes. A five-year fix might charge 5% in year one falling to 1% in year five.
On a £250,000 balance that is £12,500 in year one. It is not a technicality. Before signing a five-year deal, ask yourself concretely: what would have to happen in the next five years for me to need out of this, and how likely is it?
The exemption almost nobody uses
Nearly every fixed deal allows you to overpay up to 10% of the balance each year with no charge at all. Over a five-year fix that is a great deal of flexibility hiding inside a product people describe as locked. If you are worried about being tied in, check the overpayment allowance before you rule it out. See what overpaying does.
When a tracker genuinely makes sense
- You expect to repay or remortgage soon. Many trackers have no early repayment charge, so you can leave the moment something better appears. That optionality is worth real money.
- You are waiting for something. A property sale, an inheritance, a divorce settlement, planning permission. A penalty-free tracker parks you sensibly until the picture clears.
- You have genuine headroom. If a two-point rise would be annoying rather than frightening, you can afford to take the variability.
What a tracker is not is a clever way to beat the market. If a rise would put you in difficulty, the certainty of a fix is worth more than any saving a tracker might deliver.
Do not judge a rate by the rate
A product with a lower rate and a £1,499 fee can easily cost more than one with a higher rate and no fee, particularly on a smaller loan. What matters is the total cost over the fixed period: payments plus fees, minus any cashback.
On a £150,000 loan a £999 fee is worth about 0.22% a year across three years - which is far bigger than the difference between many competing headline rates. Every recommendation we make is compared on true cost, not on the number in the advert.
And one thing that is not free
Adding the product fee to the loan feels painless because you do not pay it today. You then pay interest on it for the entire remaining term, often twenty-five years. On a £1,499 fee that can more than double what it really costs you. Pay it up front if you possibly can.
Start here
Want the true-cost comparison for your case?
Send your loan size, deposit and how long you expect to stay. We will compare fixes and trackers on total cost over the period, fees included.
- The first conversation is free
- No credit check, no hard search
- A reply within one working day
Prefer to talk now? Call 0333 339 7301 or email [email protected].