Fixed vs Tracker vs Discount Mortgages: Complete Guide 2026

The Three Main Mortgage Types in 2026

The letter from your lender usually arrives a few months before your deal ends. It tells you the date your current rate finishes, the rate you'll move to if you do nothing, and the new deals they can offer you. Most of those deals will be one of three types: a fixed rate, a tracker or a discount.

You face the same choice when you buy your first home. Each type works differently, and every one of them has a downside. Be wary of anyone who says one type is always best.

Fixed-Rate Mortgages: How They Work

With a fixed rate, your interest rate stays the same for a set period. Two and five year fixes are common, and three, ten and even longer ones exist. Your monthly payment doesn't move during that time, whatever happens to Bank Rate.

Example of a Fixed Rate

Say you borrow £200,000 on a repayment mortgage over 25 years, fixed at 4.25% for two years. Your payment is about £1,083 a month for those two years, whether rates jump or fall. (Illustrative figures only, not a current deal.)

What Happens at the End of the Fixed Period?

Your lender will write to you before the deal ends. You then have three routes:

• Take a new deal with the same lender, called a product transfer
• Remortgage to a different lender
• Do nothing, and move onto your lender's Standard Variable Rate (SVR)

Lenders who have signed the government's Mortgage Charter have agreed to let you lock in a new deal up to six months before your current one ends. If you're up to date with payments and not borrowing more or changing your term, they've also agreed you can switch to a new deal without another affordability check. Our guide on what happens when your fixed rate ends goes through the timing in more detail.

Advantages of Fixed Rates

• You know exactly what's going out each month, which makes budgeting easy
• If Bank Rate rises, your payment doesn't
• Fixed deals are widely available, so there's plenty to compare

Disadvantages of Fixed Rates

• If rates fall, you keep paying the old rate until the deal ends
• Most fixes have early repayment charges, so leaving early to move or remortgage can be expensive
• Overpayments are usually capped, often at 10% of the balance a year

Tracker Mortgages: How They Work

A tracker follows the Bank of England's Bank Rate (often still called base rate) plus a set margin. When Bank Rate moves, your rate moves by the same amount. Your offer tells you exactly when the change kicks in, as that varies between lenders.

The Bank of England reviews Bank Rate eight times a year. On 29 October 2026 it stood at 3.75%. You can check the current figure on the Bank of England website.

Example of a Tracker

Take a two year tracker at Bank Rate plus 0.25%. With Bank Rate at 3.75%, you pay 4.00%. If Bank Rate goes up by 1%, you pay 5.00%. If it drops by 0.5%, you pay 3.50%. The margin stays put for the length of the deal.

The Duration of a Tracker

Most trackers run for a set period, often two or five years, then move to the lender's SVR. Some lenders offer lifetime trackers that follow Bank Rate for the whole term. Longer trackers tend to come with higher rates, and nobody knows where Bank Rate will be in ten years.

Watch for a Collar

Some trackers have a collar, sometimes called a floor. It's the lowest rate you'll pay, however far Bank Rate falls. With a collar at 4%, your rate stops at 4% and you don't get the rest of the cut. It's easy to miss in the paperwork, so ask.

Advantages of Trackers

• When Bank Rate falls, your payment falls too (unless a collar stops it)
• The rate is easy to understand: Bank Rate plus a margin you can see in your offer
• Some trackers have no early repayment charges, so you can overpay, move or switch to a fix without a penalty

Disadvantages of Trackers

• When Bank Rate rises, your payment rises with it, so you need room in your budget
• Not every tracker is penalty free. Plenty still have early repayment charges, so check
• A collar can stop you benefiting from cuts

Discount Mortgages: How They Work

A discount mortgage is set at a fixed amount below your lender's own SVR. It's the type people understand least, because it doesn't follow Bank Rate. It follows a rate your lender sets for itself and can raise or lower at any time. Bank Rate is one of the things lenders weigh up, but not the only one. A lender may not pass on all of a Bank Rate cut, and it can raise its SVR when Bank Rate hasn't moved.

Example of a Discount Mortgage

Say your lender's SVR is 7.00% and you're offered a 2.75% discount for two years. You pay 4.25%. If the lender puts its SVR up by 0.25%, you pay 4.50%. On a £200,000 repayment mortgage over 25 years, that moves your payment from about £1,083 to about £1,112 a month. (Illustrative figures only.)

Duration and Remortgaging

Discounts usually last two to five years. Then the lender will usually move you onto its full SVR unless you choose a new deal. In the example above, that's 4.25% jumping to 7.00%.

Advantages of Discounts

• The starting rate can sometimes be lower than a fix from the same lender
• If the lender cuts its SVR, your payment falls
• Some discount deals have lower early repayment charges than fixes, but check, as many still have them

Disadvantages of Discounts

• Your payment can change whenever the lender changes its SVR, and you can't predict when
• Some discount deals have a collar, sometimes set at the rate you start on, so you'd see none of the benefit if the SVR fell
• When the discount ends, you're on the full SVR unless you move

What About the Standard Variable Rate (SVR)?

The SVR is the rate you move to when a deal ends and you haven't picked a new one. Each lender sets its own, and it's usually well above what you'd pay on a new fixed, tracker or discount deal.

It does have one upside. There are no early repayment charges on the SVR, so if you're about to sell or waiting for a remortgage to complete, a short spell on it can make sense. Sitting there for months without meaning to is what costs people money.

Side-by-Side Comparison: Fixed vs Tracker vs Discount

Scenario Comparison: What Actually Happens?

Here's the same mortgage on a two year fix and a two year tracker, costed over the two years only, because that's when you'll be choosing again anyway.

Illustrative assumptions: £200,000 repayment mortgage over 25 years. Fix at 4.25%. Tracker at Bank Rate plus 0.25%, starting at 4.00%. Where Bank Rate changes, it does so six months in and then stays put. No fees included. These aren't current deals.

So in this example the tracker comes out cheaper if rates stay put or fall, and costs about £1,340 more over two years if Bank Rate rises by 1%. If that tracker had a collar at 4.00%, the falling rates row would look just like the first one. Real deals also have different fees, so add those in before you compare.

Understanding Early Repayment Penalties

An early repayment charge (ERC) is what you pay if you clear the mortgage, switch deal or overpay beyond your allowance while the deal is running. It matters most if you might move house soon.

Fixed Rates

Most fixes have ERCs, usually a percentage of what you repay, often between 1% and 5%. Many lenders step them down each year, say from 5% to 1% by the last year, but some charge a flat rate throughout. On £200,000, a 3% charge is £6,000.

Trackers

Some trackers have no ERCs at all, which is one of their real strengths. Plenty do, though, so read the offer rather than assume.

Discounts

Discount deals can have ERCs during the discount period too. On some mortgages the charge period runs past the end of the special rate, so check the dates in your offer.

What About Interest-Only Mortgages?

Interest-only is about how you repay, not the type of rate. It can be fixed, tracker or discount, and everything above still applies.

For a residential interest-only mortgage, FCA rules say the lender must see evidence of a clearly understood and credible plan to repay the loan at the end of the term. In practice lenders also tend to want a bigger deposit and often a higher income. Most first time buyers end up on repayment.

Which Type Suits You?

A Fixed Rate Might Suit You If:

• Your budget has little room for a payment rise
• You're fairly sure you won't move or want to repay early during the fix
• You'd sleep better knowing the number won't change

A Tracker Might Suit You If:

• You could cope if your payment went up, and you've worked out by how much
• You might move, sell or come into money, and want a deal without ERCs
• You want to benefit straight away if Bank Rate falls

The catch is that nobody, your broker included, knows where Bank Rate is going. Pick a tracker because you can live with a rise, not because you're betting on a fall.

Think Carefully About a Discount If:

• You'd be uncomfortable with a lender changing your rate when Bank Rate hasn't moved
• You haven't checked how big the jump to the full SVR will be when the discount ends

A discount from a lender with a competitive SVR can still be decent value. Compare it with a tracker of the same length first.

Remortgaging: The Critical Skill

Whatever you choose, you'll be deciding again when the deal ends. The usual order:

1. About six months before the end date, check what your current lender offers you as a product transfer
2. Compare it with what other lenders would offer through a remortgage, fees included
3. If you're staying put, you can usually lock in the new rate early. A product transfer often needs no new affordability check or valuation if you're not borrowing more
4. If you're moving lender, expect a full application, credit search, affordability check and valuation, so leave time for it to start the day the old deal ends

Staying with your current lender is often the quickest route. It isn't always the cheapest.

The Short Version

• A fixed rate gives you certainty, but leaving early costs money and you miss out if rates fall.
• A tracker follows Bank Rate both ways. Check for a collar and for ERCs.
• A discount follows your lender's SVR, which your lender sets and can change.
• Compare deals over the deal period only, fees included.
• Start looking around six months before your deal ends.