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Fixed rate vs tracker rate mortgage: price gap widens

The cost of fixed rate mortgages drops due to more low interest rate deals becoming available

A photo of Grace Lynch, the author

By Grace Lynch

Published on: 11 April 2023

5 min read

Fixed rate vs tracker rate mortgage: price gap widens

More and more low interest fixed rate mortgages are becoming available in the UK. This is despite continued increases to the Bank of England (BoE) base rate. Over the last couple of weeks many top-rated lenders have announced they are cutting their rates. This is positive news for the mortgage market moving forwards.

This does mean that those on a variable rate are now looking at far higher pricing in many cases. The gap between fixed and variable rates, with fixed rates generally being lower.

The main question here is how is your mortgage affected by this? You may be on the lookout for a new mortgage with better rates. Maybe you have a tracker rate deal with monthly payments becoming more expensive and way less affordable.

Low fixed rate mortgages

It was recently revealed that UK mortgage repayments have gone up by almost 60% due to higher rates from the Bank of England. This may cause many homeowners to think about changing their mortgage terms or switching deals completely to dodge rising costs.

Several big name lenders have announced new lower fixed rates for selected mortgages within the last couple of weeks. These lenders include:

This follows on from lenders including Lloyd’s Bank and Virgin Money announcing fixed rates under 4% back in February. It had been expected rates would continue to improve across the market. This has been slowed by an unsettled UK financial market.

Other lenders did announce lower rates in February, but it has taken until now for more to do the same.

Read more about our mortgage interest rate predictions for 2023 in our MPO Interest Rate Forecast.

Find out more about factors that could affect mortgages this year in our Budget 2023 update for mortgages and housing.

Best mortgage rates 5 year fixed

The Bank of England increased their base rate to 4.25% in March (the 11th rise in a row). Variable rate mortgages have become more expensive as interest rates continued to climb.

Last year, trackers were far lower cost option than fixed rate deals for many people (rates as low as 2.94%). This has now flipped for several reasons, the main one being high inflation rates and continued BoE rate rises.

Here we have some examples of 5 year fixed rate mortgages and the interest rates available:


LenderInterest rateMonthly repayment cost
Virgin Money4.41%£595
Royal Bank of Scotland4.47%£598

*Based on a 25 year repayment mortgage of £120,000 with a 10% deposit (90% loan to value)


LenderInterest rateMonthly repayment cost
AIB (Northern Ireland Only)4.05%£515
Coventry Building Society4.11%£513
AIB (Northern Ireland Only)4.15%£520

*Based on a 25 year repayment mortgage of £120,000 with a 20% deposit (80% loan to value)

Here we have a examples of 2 year fixed rate mortgages and the interest rates available:

LenderInterest rateMonthly repayment cost
Virgin Money4.75%£616
Virgin Money4.82%£620

Best 2 year tracker mortgages

Here we have some examples of 2 year tracker rate mortgages and the interest rates available:


LenderInterest rateMonthly repayment cost
Yorkshire Building Society5.19%£643
Royal Bank of Scotland5.24%£647

*Based on a 25 year repayment mortgage of £120,000 with a 10% deposit (90% loan to value)


LenderInterest rateMonthly repayment cost
Yorkshire Building Society4.69%£544

Should you get a tracker or fixed rate mortgage?

It is hard to say which type of mortgage choice will be the best choice, as everyone’s circumstances are different. The range of low interest fixed rates is increasing but Bank of England base rates have been increasing too. A fixed rate may seem the obvious decision – but you shouldn’t totally count out tracker rates.

There are a lot of pros and cons to both tracker rate and fixed rate mortgages. Although the price gap is getting wider currently, it is wise to remember a mortgage can span over 10, 20 or even 40 years. You should choose the mortgage that feels the best fit long term.

There are some advantages to tracker mortgages that may still work well for some people. Tracker mortgage deals:

  •  Are very flexible, and some will have a set cap that the interest rate can’t rise above (even if the BoE base rate is above the cap)
  • You may be able to avoid fees like early repayment charges or ‘ERCs’ if you want to switch your mortgage in the future (ERCs are commonly applied to fixed rate mortgages)
  • If the Bank of England rate drops in the future, you could find yourself missing out on savings if tied into a fixed rate deal
  • Certain lenders will allow you to switch easily from a tracker deal to a fixed deal, without extra fees.

If you have a tracker rate (or any kind of variable rate), it could be worth considering a remortgage deal. If your interest rates are getting higher than what is comfortable for your budget, switching could be your best option.

A fixed rate mortgage will freeze your interest rate at the agreed amount for a set number of years. This allows for more certainty and financial security for years to come.

Remortgaging your home is a big commitment so make sure this is what you want to do before starting the process. You have a few options if you decide to remortgage. You can:

  • Switch to a new deal with your current lender (known as a product transfer, which can be quicker and less complicated to arrange, and fees are generally lower)
  • Move to a new lender that is offering better rates (searching the market might reveal there is a lender offering the mortgage you need with far lower rates)

You could also get advice from a qualified mortgage broker before making any decisions. It can be good to get the opinion of a specialist when comparing mortgages. This can help you be confident the mortgage you choose is your best option for saving money. A broker will also be able to advise you which lenders will be most likely to approve your application.

Note: Speaking to your current lender can help you avoid things like new affordability assessments. This is if you are doing a simple product transfer (e.g. swapping from a variable rate to a fixed rate). It may be harder to qualify for the rate you want with a new lender.

If you want to remortgage early than planned, learn more about what to do in our guide ‘Can you remortgage early?’.

We also speak more about this topic in our ‘MPO guide to remortgaging in 2023’.

We also have a guide to the ‘Pros and Cons of remortgaging’ with more useful tips and information.


Bank of England – Mortgage Lenders and Administrators Statistics – 2022 Q4

Financial Conduct Authority – Mortgage lending statistics – March 2023

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