Fixed vs Tracker Mortgage 2026: Is a 1.5% Rate Gap Worth the Risk?

Hi everyone, a very quick mortgage market update from me.

Over the last few weeks, we’ve seen interest rates soar. However, we’re now seeing a significant difference between fixed rates and tracker rates, with tracker rates currently around 1.5% lower than fixed rates.

As a result, the most popular choice among our clients today is a tracker mortgage. But is a tracker rate right for you?

I’m Muhammad, and I’ve been a mortgage adviser in the industry for more than a decade. So, let’s go through the details.

1. Why Is There a 1.5% Difference Between Fixed and Tracker Rates?

The answer is quite simple.

Oil prices are rising, and tensions in the Middle East remain high. As a result, we expect energy prices to increase, which could eventually push inflation higher.

Consequently, swap rates have risen, and the mortgage market is reflecting these changes. This is why fixed mortgage rates have increased significantly.

2. What Does This Increase Mean for You?

Let’s assume you have a mortgage of £300,000.

A difference of 1.5 percentage points in the interest rate could translate into a substantial additional cost. Depending on your mortgage term and repayment structure, this could amount to several hundred pounds a month.

For many people, that is a significant financial burden.

Recently, I had a customer whose mortgage deal was coming to an end. Five years ago, we had secured a fixed rate of just 1% for him. Today, the fixed rate available to him is around 6%.

That’s an increase of five percentage points, which can make a considerable difference to monthly repayments.

Fortunately, his outstanding mortgage balance is relatively small, so the impact will not be as severe. But imagine having a much larger mortgage. You would certainly feel the difference.

3. Should You Choose a Fixed Rate or a Tracker Rate?

In the current market, we’re seeing a difference of around 1.5 percentage points between fixed and tracker rates.

So, which option should you choose?

A Fixed Rate May Be Right for You If:

• You value certainty and stability.
• You want to budget confidently each month.
• You are happy to pay a little more for protection against potential interest rate increases.

A Tracker Rate May Be Worth Considering If:

• You are comfortable taking on some interest rate risk.
• You can afford your repayments if interest rates increase.
• You want to take advantage of the current difference between fixed and tracker rates.

Let’s assume you have a £300,000 mortgage. A 1.5-percentage-point difference could represent a substantial potential saving, depending on the mortgage term and the specific products available.

However, if you choose a tracker, you need to consider how much interest rates could rise before the financial advantage disappears.

A useful approach is to carry out a break-even analysis to establish when a tracker mortgage might become more expensive than a fixed-rate mortgage.

Of course, this involves several assumptions, and you also need to consider whether you could afford the higher repayments if rates increased.

My recommendation would be to start saving the difference between the fixed and tracker repayments every month. If interest rates rise, you will have a financial buffer available to help cover the additional cost.

4. What Strategy Are Our Clients Using?

Some of our clients are choosing tracker mortgages, even though they expect interest rates to rise over the coming months.

Why?

Many tracker mortgage products come without early repayment charges (ERCs), although this depends on the specific product.

This can give borrowers greater flexibility to switch to another mortgage product without paying an early repayment penalty, subject to the product’s terms and conditions.

Their strategy is relatively straightforward.

They take out a tracker mortgage and monitor how the market develops over the coming months. If they decide that it’s the right time to move to a fixed rate, they can explore switching to a fixed-rate product without necessarily incurring an early repayment charge.

Of course, we cannot predict exactly where interest rates will go. Although we may expect rates to rise, the market can change in unexpected ways.

That’s why flexibility and careful planning are so important.

5. What Is My Advice: Fix or Track?

Ultimately, the answer depends on your personal circumstances, financial position and attitude towards risk.

This is where professional mortgage advice really matters.

In a volatile market like this, it is always worth seeking advice before making a decision.

If your mortgage deal is coming to an end, consider starting the remortgage process six months in advance.

Speak to a mortgage adviser and secure a suitable mortgage product. If your circumstances or the market change during that period, your adviser may be able to review the options and help you switch to a more suitable product, subject to the lender’s terms and the product’s availability.

The same principle applies if you are buying a property.

If you are planning to buy, consider securing a mortgage product early. If you do nothing, interest rates could rise, and you may eventually have to choose a more expensive deal. If rates fall, your adviser may be able to help you explore better options.

There are several ways we can help our customers navigate situations like this.

For example, I mentioned break-even analysis earlier. At our firm, we can sit down with clients, assess the potential costs and savings, and explain the risks associated with each option.

This helps our clients make informed decisions based on their own circumstances rather than simply following what the market is doing.

6. How Can We Help You?

If you need help with anything I’ve discussed today, please get in touch. Our contact details are provided below.

I’ve also created another video that provides a more detailed comparison between fixed-rate and variable-rate mortgages, including tracker mortgages. You can find the link to that video above.

Thank you very much for watching our channel.

This is Ifika signing off, and I wish you all the very best!