Tracker Mortgage

Understand how your mortgage rate can move.

A tracker mortgage is typically linked to an external interest-rate benchmark, so the mortgage rate can move when that benchmark changes. Learn how tracker mortgages work, what can affect your repayments and what to consider before choosing one.

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Tracker Mortgage Explained

What is a tracker mortgage?

A tracker mortgage is a type of variable-rate mortgage where the interest rate is designed to track an external benchmark according to the terms of the mortgage.

When the benchmark changes, the mortgage rate can change too. This means your monthly mortgage payment may increase or decrease depending on how the rate moves and how your mortgage is structured.

The exact relationship between the benchmark and your mortgage rate should always be checked in the specific mortgage product terms.

01 The mortgage rate is linked to an external benchmark according to the product terms.

02 Changes in the benchmark can affect the interest rate applied to your mortgage.

03 Your monthly repayment can therefore become less predictable than with a fixed rate.

Modern home representing tracker mortgage planning

KEY DIFFERENCE Rate flexibility. A tracker mortgage can move with its linked benchmark rather than staying fixed.

Rate Movement

What happens when the linked rate changes?

A tracker mortgage can respond to changes in its linked benchmark. The direction and size of any change will depend on the mortgage terms.

Illustrative rate movement

This visual is for explanation only and does not represent a specific mortgage or future rate forecast.

The actual rate path depends on the relevant benchmark and the terms of the mortgage.

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If the linked rate rises

Your mortgage interest rate may increase, which can lead to higher monthly repayments depending on the mortgage terms.

↓

If the linked rate falls

Your mortgage rate may decrease, potentially reducing your monthly repayment depending on how the mortgage is structured.

If rates remain uncertain

Future repayments can be harder to predict, so your budget should allow for possible changes rather than relying only on the current payment.

Homeowner reviewing mortgage information

Understanding The Structure

The important parts of a tracker mortgage.

A tracker mortgage can look straightforward, but the exact terms matter. Before choosing a product, understand what benchmark it follows and how the mortgage rate is calculated.

01 Reference benchmark
The mortgage is linked to a specified benchmark according to the product terms.

02 Tracker margin
The mortgage rate can include a margin or additional percentage above the benchmark.

03 Rate changes
The product terms determine how and when changes in the linked benchmark affect your rate.

04 Repayment impact
Changes in the interest rate can affect the amount you need to repay.

Benefits & Considerations

Tracker mortgages can offer flexibility, but rates can move.

The main attraction of a tracker mortgage can be its ability to follow changes in an external benchmark. However, this also means repayments may be less predictable.

Potential benefits

Depending on the mortgage terms and wider rate environment, a tracker mortgage may offer useful flexibility for some borrowers.

✓ Your rate can move down if the linked benchmark falls.

✓ The relationship with the benchmark can make rate movements easier to understand.

✓ Some products can offer flexibility depending on their individual terms.

Important considerations

The same rate movement that can reduce repayments can also increase them when the linked benchmark rises.

→ Monthly repayments can increase if the mortgage rate rises.

→ Future payments can be less predictable than under a fixed-rate mortgage.

→ Fees, caps, floors and early repayment terms should be checked carefully where applicable.

BEFORE YOU CHOOSE Read the full mortgage terms.

Compare Carefully

What should you check before choosing a tracker mortgage?

The current rate is only one part of the decision. Look at how the product behaves if rates move in either direction and consider whether the potential repayment changes fit your budget.

01 Identify the benchmark used by the mortgage and understand how the tracker rate is calculated.

02 Check whether there are any limits, floors, caps or other conditions affecting rate changes.

03 Consider whether your budget could handle higher monthly payments if rates increase.

04 Review fees and any early repayment conditions before comparing the overall cost.

Frequently Asked Questions

Tracker Mortgage FAQs

Quick answers to common questions about tracker mortgage rates, repayments and potential risks.

A tracker mortgage is a variable-rate mortgage where the interest rate is linked to an external benchmark according to the product's terms. Changes in that benchmark can affect the mortgage rate.

Yes. If the benchmark linked to the mortgage increases, the mortgage rate may increase according to the product terms. This can result in higher monthly repayments.

It can, depending on the mortgage terms. If the linked benchmark falls, the mortgage rate may also fall, which could reduce repayments depending on the mortgage structure.

No. A tracker mortgage is generally a variable-rate mortgage. Its rate can move in line with its linked benchmark under the terms of the mortgage.

There is no universal answer. The overall cost depends on the specific mortgage rate, fees, repayment term and how the relevant benchmark changes over time.

Consider how the linked rate works, how repayments could change if rates rise or fall, the mortgage fees, early repayment conditions and whether your budget can accommodate potential payment increases.

Understand the rate before you choose the mortgage.

Explore how tracker mortgages work, consider possible rate movements and compare the wider costs before making a mortgage decision.