Fixed or tracker mortgages: What’s best for you in 2025

Whether you are a first-time buyer or are remortgaging, the type of mortgage you choose is a big decision. Do you opt for a tracker mortgage and hope that interest rates fall, or do you choose the more predictable option and fix your rate?
The differences between tracker and fixed-rate mortgages
A tracker mortgage is valid over a fixed term but since it tracks the Bank of England’s base rate your interest and monthly mortgage rates will vary over that period. Your lender charges you the Bank of England base rate plus an additional fixed percentage on top of which lenders may include a cap and collar. The former means your interest rate will not exceed the capped percentage while a collar means it won’t go below a set level.
With a fixed-rate mortgage, you agree the rate of interest you will pay on your mortgage at the outset. Regardless of whether the base rate goes up or down your interest rate payable and your monthly mortgage payments stay the same until the deal ends.
The basic pros and cons of a tracker mortgage
The fact that a tracker mortgage will fall if the base rate decreases makes it an attractive option for those who might previously have been stuck on high fixed rates and are waiting for mortgage rates to come down further before fixing. Tracker rates are also often more competitive than a lender’s standard variable rate and some may also be cheaper than fixed rate deals.
However, the cap and collar can limit savings made and you also need to be able to afford to pay more if rates rise, so budgeting can be a challenge.
The basic pros and cons of a fixed-rate deal
With a fixed-rate deal, the interest payable stays the same no matter what happens with the base rate, so you are protected if it rises. Such rates are also more competitive than lender’s standard variable rates. A fixed-rate deal improves your ability to budget since the payment you make each month will stay the same regardless of what’s happening in the rest of the market and the wider economy.
However, a fixed-rate deal also means that you won’t take advantage of any subsequent falls in the base rate which would reduce your monthly payments. If interest rates continue to fall, this could be frustrating, especially if you’ve chosen a longer fixed-term and the base rate comes down significantly in that time.
Making the decision
2024 saw two cuts in the Bank of England base rate and in February of this year we saw the first cut of 2025. However, in March the Bank of England overwhelmingly chose to keep the base rate static at 4.5% with an 8-1 majority.
It highlighted the risk of global trade policy uncertainty, as well as other geopolitical influences negatively impacting the financial market. It also warned that February’s reporting of slightly higher than expected inflation of 3% in January, was a concern.
You must carefully consider your budget and your personality. Are you a risk taker, happy to take the gamble that you might save and therefore a tracker might be an option? Or is the uncertainty likely to test your nerves as well as your finances? Deciding which path to take requires professional advice but we hope this helps kickstart your thinking.