After years of rock-bottom base rates, UK borrowers faced a sharp adjustment when the Bank of England raised rates from 0.1% to a peak of 5.25% between 2022 and 2023. By early 2025, rates have begun to ease — but they remain well above the historic lows many buyers and remortgagers got used to. The question of whether to fix your mortgage rate or follow the base rate on a tracker product is more consequential than at any point in the past decade.
Fixed rate mortgages: the case for
A fixed rate mortgage locks your interest rate — and therefore your monthly payment — for a set period, typically two or five years. Whatever happens to the Bank of England base rate during that period, your payments don't change.
The primary advantage is certainty. You know exactly what you're paying each month, which makes budgeting straightforward. In an environment where rates are expected to fall, you're paying a premium for that certainty — but for many households, the peace of mind is worth it.
Fixed rates are generally slightly higher than tracker rates at the point of taking the mortgage, because the lender is absorbing the risk of rate changes on your behalf. The longer the fix, the higher the rate tends to be, as the lender is taking on more risk.
In 2024, 74% of new UK residential mortgages were taken on fixed rates, down from a peak of 95% in 2022 but still reflecting strong demand for payment certainty.
Tracker mortgages: the case for
A tracker mortgage follows an external rate — usually the Bank of England base rate — plus a fixed margin. If the base rate is 4.75% and your tracker margin is +0.5%, you pay 5.25%. If the base rate falls to 4.0%, you automatically pay 4.5% — no remortgaging required.
In an environment where rates are expected to fall, trackers can save significant money compared to fixing. If the Bank of England cuts rates by 1% over the course of your mortgage term, you benefit immediately. On a £250,000 repayment mortgage, that's roughly £130 per month in savings.
The downside is exposure. If rates rise unexpectedly, your payments rise too — and there's no cap unless your product includes one (some do).
The 2025 rate environment
As of early 2025, markets are pricing in gradual Bank of England rate cuts through 2025 and into 2026, taking the base rate from 4.75% to somewhere in the 3.5–4.0% range. This expectation is already partially baked into fixed rate pricing — meaning two and five-year fixes have already fallen from their 2023 highs, but not as far as they may eventually go.
The key question is timing and risk tolerance. If you fix now at 4.2% for five years and rates fall to 3.5%, you'll have overpaid for certainty. If you take a tracker at 4.5% and rates don't fall as fast as expected, you'll have paid more than a fix would have cost.
💡 Bottom line for 2025: If you need certainty and would struggle with higher payments, fix — preferably for two years rather than five, to give yourself flexibility when rates are lower. If your finances are comfortable with some variability, a tracker may save you money as cuts come through.
How to choose
Before making a decision, work through these questions: How much payment variability can you absorb? What's your view on rate direction? How long are you planning to stay in the property? (Breaking a fixed rate deal early typically incurs an Early Repayment Charge of 1–5% of the outstanding balance.)
Always speak to a qualified, independent mortgage broker rather than going directly to a lender. A good broker will compare products across the whole market and help you model different scenarios.
Cavendish Knight's verified partner network includes independent mortgage brokers across the UK who offer whole-of-market advice.
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