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Fixed rate vs tracker mortgages update

The Bank of England base rate has been increasing consistently, driving up monthly repayment costs for those on variable or tracker mortgages. In the last few weeks, many mainstream lenders have announced lower interest rates for selected fixed rate deals – increasing a price gap between fixed and variable rate customers.

Those looking to get a new fixed rate deal or remortgage look set to benefit from lower pricing while those on variable rates may struggle with rising costs.

In this blog, we are looking at fixed rate vs tracker mortgages, some examples of possible rates in 2023 and how you could save on your mortgage moving forwards.

Fixed vs variable rate mortgages

At the minute, fixed rate mortgages are looking to be a good choice for new buyers or those thinking about a remortgage.

Tracker rates and standard variable rate mortgages will always be impacted by any changes to the Bank of England base interest rate. As the BoE rises, the interest rate for mortgages will too, especially for trackers as these are directly linked to the BoE rate.

With many homeowners facing monthly repayments nearly 60% higher now vs last year, switching to a new fixed rate deal will certainly be an appealing option.

It used to be that the longer you fixed your mortgage for, the higher the rate of interest would be. Right now this isn’t the case, and many 10-year fixed rates currently have lower interest rates attached compared to 2 or 5 year deals.

Find out more about fixed rate mortgages.

Learn more about variable rate mortgages.

You can also read more about the latest interest rate rises in one of our recent blogs.

Which lenders have dropped the rates on their fixed rate mortgage deals?

The lenders that have recently announced lower fixed rate mortgages include:

  • Barclays
  • Coventry Building Society
  • First Direct
  • HSBC
  • NatWest
  • TSB

HSBC already cut over 100 of their mortgage interest rates back in January, and other lenders including Lloyd’s and Virgin Money introduced fixed rate mortgages at 3.99% interest in February. It was believed that other lenders would follow suit and though there has been some delay this has now occurred. Lower mortgage rates are overall positive news for the mortgage market, though it is hard to predict how long these rates will be available and if more will be introduced.

Tracker mortgage vs fixed rate: example rates

Here we have put together some examples of different mortgage rates for both tracker and fixed rate deals, so you can see the differences for yourself.

Lender2-year fixed rate2-year tracker rate
Royal Bank of Scotland4.86%5.24%

All the rates above are based on a repayment mortgage of £150,000 over 25 years with a £15,000 (10%) deposit.

It is clear to see that fixed rates are much lower at the moment, though of course it is possible for tracker rates to drop in the future. One good thing about tracker mortgages is the level of flexibility they offer, and if the BoE rate drops in the future they could even have a lower rate than the above fixed rate deals.

Find out more about tracker rate mortgages.

Should I remortgage to a fixed rate?

If you are concerned about the rising monthly costs of your variable rate mortgage, now could be a great time for you to consider a change. You may even just want to take advantage of the possible savings from the lower mortgage rates on offer.

A fixed mortgage rate guarantees how much you will pay for your repayments each month, something that can be helpful during a cost-of-living crisis where budgets are more stretched.

Switching to a new deal could help you to avoid rising costs – and you will benefit from significant savings in many cases.

Our skilled mortgage experts can provide you with a FREE mortgage review to check if one of these new mortgages will be better suited to your needs. We can also guide you through the whole remortgage process, answer any questions you have and help you switch quickly and hassle free.

Learn more about remortgaging with our team of specialist advisors.

Useful resources

Financial Conduct Authority – Mortgage lending statistics 2023

Statista – Quarterly development of mortgage rates March 2000 – January 2023

Office for National Statistics – How increases in housing costs impact households

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