Tracker mortgage rates are almost certain to rise tomorrow... but they're more popular than ever: Here's why

As mortgage rates have stepped higher in recent years, homeowners have been seeking ways to cut their costs. Those looking for a new mortgage will see that a relatively niche product is dominating the top of the best buy tables: the tracker mortgage. Trackers follow the Bank of England base rate, plus a certain percentage on top. For example, someone might be given a tracker mortgage at the Bank of England's base rate, currently 3.75 per cent, plus 0.3 per cent – making the rate they pay 4.05 per cent.If the base rate rose to 4 per cent, their mortgage rate would rise to 4.3 per cent. This is different to fixed rates, where the bank can't change the rate for the two or five year term.It is a situation that is likely to play out for millions of households on tracker deals tomorrow, when the Bank of England is widely tipped to raise the base rate for the first time since 2023.There have been warnings of base rate rises for some time, and yet the popularity of trackers has still increased. They now account for around a quarter of applications, according to broker John Charcol, up from around 9 per cent of applications with the firm throughout 2025.According to Moneyfacts, 24 per cent of remortgaging households researching mortgages on its site are considering variable or tracker mortgages, compared with 14 per cent in February. Popularity surge: Around a quarter of households remortgaging are opting for tracker deals, up from fewer than one in 10 last yearWhy are trackers so popular? The first reason for trackers' jump in popularity is simple. Rates on tracker deals are dramatically lower than fixed rates.The cheapest tracker deals, reserved for home buyers with the biggest deposits, start at 3.99 per cent, while for those remortgaging it is 4.06 per cent. Choosing a tracker at 4.06 per cent over a cheap two-year fix at 5.06 per cent on a £300,000 mortgage is the difference between paying £1,594 a month and £1,764 a month – a £170 saving. This assumes a 25-year term. 'Interest in trackers has grown significantly this year,' says Nicholas Mendes of broker John Charcol. 'The rise is no surprise given the gap in pricing. 'Trackers can be close to one percentage point cheaper than the best fixed rates available, and they usually come without early repayment charges.'The average new two-year tracker rate is 4.68 per cent, according to Moneyfacts, compared to 5.97 per cent for two-year fixed rates and 6 per cent for five-year fixes.Aaron Strutt of broker Trinity Financial says he has also noticed a surge in tracker popularity.'The trackers are so cheap now they are difficult to ignore,' says Strutt. 'Across several of the biggest lenders, some trackers are around one percentage point cheaper than comparable fixed rates - both for residential and buy-to-let.' I took a tracker... and don't regret it Mortgage broker Aaron Strutt says he personally felt the risk was worth taking and decided to move his own mortgage to a tracker recently.'Even with a few base rate hikes expected I thought it was still the best option,' he says. 'Some borrowers prefer certainly over their monthly payments, but at the moment there is a high price to pay for that security.'If the war in Iran stops then there may not be multiple base rate hikes. 'At the moment we simply don’t know what is going to happen to the cost of mortgages and trackers provide flexibility.' The get-out clause Another key attraction of tracker mortgages is that they usually come without early repayment charges. These are the fees lenders charge for getting out of a fixed mortgage early, and they can sometimes cost as much as 5 per cent of the total mortgage value. On a £300,000 mortgage, this would cost £15,000. But trackers can often be paid off, overpaid or switched away from without penalty. It gives homeowners on a tracker a crucial get-out, in the case that the base rate rises, meaning they could switch to a fixed-rate deal if those became cheaper. What if the base rate keeps rising? If the base rate goes up by 0.25 percentage points tomorrow, many tracker borrowers will still be far better off than if they took a fixed rate. This is especially true of those who have taken a tracker recently at rates around 4 per cent – and while fixed rates aren't explicitly tied to the base rate, they do tend to move in tandem with it, too. But traders are currently betting on two or three more interest rate rises over the next 12 months, which could see base rate reach 4.75 per cent.If that is the case, the uncertainty of a tracker could start to outweigh the cost advantages for some. However, many economists disagree with the financial markets and don't see base rate going above 4.25 per cent. Some forecasts suggest it will fall to 3.5 per cent or even 3 per cent in 2029.Some households have therefore calculated that even if interest rates were to rise to 4.75 per cent they are still unlikely to be much worse off with a tracker than if they opted to fix today. A word of warning The big drawback of trackers is that your mortgage rate could potentially change every time the Bank of England meets to decide interest rates, which happens roughly every six weeks. If you take one, you need to be comfortable with changes in your monthly budget and be able to adjust it accordingly. Mortgage broker Nicholas Mendes says he still favours a fixed rate in an uncertain world.Mendes says: 'Borrowers understand that base rate would need to rise by close to one percentage point, the equivalent of four quarter-point increases, before a fixed rate becomes the cheaper option, but many feel there is worse to come. 'The conflict in Iran has lasted longer than anticipated, there are concerns it could escalate again after the US midterm elections, and energy bills are expected to rise by around 27 per cent in January.'With household budgets already stretched, many borrowers simply have very little room to absorb further increases. 'A fixed rate gives them certainty over their biggest monthly cost while energy and other bills rise, and for many that peace of mind outweighs the potential saving of a tracker.'How to find a new mortgage Mortgage rates have jumped as conflict with Iran has driven up inflation expectations and dashed hopes of interest rate cuts.If you need a mortgage because you are buying a home, or your current fixed rate deal is due to end, you should explore your options as soon as possible. This is Money has a long-standing partnership with fee-free broker L&C, to provide you with expert mortgage advice.Use This is Money and L&Cs best mortgage rates calculator to show deals matching your home value, mortgage size, term and fixed rate needs.Or use L&C’s online Mortgage Finder to search thousands of deals from more than 90 different lenders to discover the best deal for you.Mortgage service provided by London & Country Mortgages (L&C), which is authorised and regulated by the Financial Conduct Authority (registered number: 143002). The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage