The choice gets framed as a bet on interest rates, which is not a bet most people want to be making. It is more useful to ask what each one gives you and what it takes away.
What each one actually is
Fixed
The rate cannot change for an agreed period, whatever happens to the Bank of England base rate. You are buying certainty: the payment is the payment, and you can budget around it. The price of that certainty is an early repayment charge if you need to get out before the end.
Tracker
The rate sits at a set margin above the Bank of England base rate and moves whenever the base rate moves, up as readily as down. Some trackers carry no early repayment charge at all, which can be worth more than the rate itself if you may need to move or repay.
Discounted variable
A set discount off the lender’s own standard variable rate. Because the lender can move that rate when it chooses, the payment can change even though the discount has not. Less predictable than a tracker, and the reason why is worth understanding before taking one.
Standard variable rate
Where a mortgage lands automatically when a deal ends. The lender sets it and can change it. It is almost never where anybody intends to be, and doing nothing is how people end up there.
The questions that actually decide it
- 01How much does a change in the payment hurt?
If a rise of a couple of hundred pounds a month would be uncomfortable rather than merely annoying, that is an argument for certainty, regardless of what anybody thinks rates will do.
- 02How long do you expect to keep this mortgage?
A five-year fix is cheap certainty if you are staying put and expensive if you sell in year two and cannot port it. This is the question people answer least carefully and regret most.
- 03Might you need to repay a lump sum?
An inheritance, a bonus, a business sale, a property to sell. Early repayment charges and annual overpayment allowances are the detail that matters here, and they vary far more between products than the headline rate does.
- 04Is anything in your life about to change?
A move for work, a baby, a business starting, a relationship ending. Tying yourself in for five years is a different decision when the next two are uncertain.
The number worth asking for is not the rate. It is the early repayment charge, year by year, and the annual overpayment allowance. Those two decide how trapped you are, and they are the ones nobody reads.
Two things people get wrong
“I’ll take a tracker and switch to a fix if rates rise.”
By the time base rate rises, the fixed rates on offer have usually already moved to reflect it. The fix you switch to is not the fix you were looking at. That is not an argument against trackers — it is an argument against relying on that particular escape route.
“The fee doesn’t matter, I’m adding it to the loan.”
Adding a product fee to the loan means paying interest on it for as long as the mortgage runs. On a smaller loan a fee-free product at a slightly higher rate is very often the cheaper outcome. The comparison worth doing is the total cost over the deal period, fee included, not the rate.