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Lifetime Tracker Mortgages

When considering how to pay interest on your mortgage and minimize your long-term payments, you have several options to explore. Among these is the lifetime tracker mortgage, which can sometimes be confused with a traditional tracker mortgage.

This article aims to clarify any misunderstandings and explain what a lifetime tracker mortgage entails.

The Following Topics Are Covered

What Is The Difference Between A Variable Mortgage And Tracker Mortgage?

A variable rate mortgage is a type of mortgage where the interest rate varies depending on a benchmark rate, which is generally the Bank of England's base rate or other rate markers. On the other hand, a lifetime tracker mortgage is a type of variable rate mortgage that remains fixed throughout the mortgage term, which is usually 25 years.

Unlike other variable rate mortgages, which have a selected term of 2 or 5 years, lifetime tracker mortgages offer a long-term fixed interest rate for the entire mortgage term.

Deciding if a lifetime tracker mortgage is suitable for you largely hinges on your risk tolerance and warrants a conversation with a knowledgeable professional who can explain the different interest payment options available for your mortgage.

How Do Lifetime Tracker Mortgages Work?

When you opt for a lifetime tracker mortgage with a lender, they will decide on the percentage points above the shadowing rate for your mortgage.

Generally, this rate is a few percentages higher. As the market rate fluctuates, your rate will also vary. If the rate drops, you will be required to pay a reduced amount of interest.

However, if the rate increases, as it has for the Bank of England base rate in 2023, your payments will also go up. Certain lenders may offer the option to limit the percentage increase for your lifetime tracker mortgage rate.

For example, currently, the Bank of England base rate stands at 4.25%. If you opt for a fixed rate of 2% above the base rate, your interest rate will be 6.25% until the base rate changes. In case the base rate falls to 2%, your interest rate will also decrease to 4%. This same trend will continue until the end of your mortgage term if you have a lifetime tracker.

What Are The Pros and Cons Of Tracker Mortgages?

A lifetime tracker mortgage is worth considering for your investment property, but like all mortgage products, it has advantages and disadvantages. Your individual circumstances will determine whether it is appropriate for you.

Lifetime Tracker Pros

  • The rate change is easily understandable since it aligns with the rate decisions of the BOE.

  • Throughout the duration of your mortgage, you need not worry about paying additional mortgage arrangement fees.

  • As the interest rates decrease, your monthly repayments will likewise decrease.

  • Your lifetime tracker mortgage rate may have a maximum cap or level that it cannot surpass.

Lifetime Tracker Cons

  • When the Bank of England increases its base rate during a rate-raising cycle, your monthly mortgage payments will also increase. This means that your mortgage could end up costing more than you initially anticipated, especially if the rate rises more than you expected.

  • Unfortunately, it's difficult to budget for your exact monthly mortgage payments in the long term because you can't predict how interest rates will change in the next 10 years.

  • Additionally, some lifetime tracker mortgages may have a collar, which means that their rates cannot fall below a certain level.

What Are Collar's and Caps

A collar is a fixed minimum interest rate that must be paid on a mortgage, regardless of any fluctuations in the Bank of England base rates.

It serves as a safeguard for both the lender and the borrower in the event of negative interest rates or an unsustainable rate drop.

On the other hand, a cap is a maximum limit on the interest rate that a borrower must pay on their mortgage.

This cap provides protection to the borrower from sudden spikes in mortgage payments due to volatile market conditions.

Can I Make Overpayments On A Tracker Mortgage?

When you're selecting a mortgage, it's important to determine the amount you can overpay without incurring a fine. A lot of lenders allow you to overpay up to 10% annually.

Fixed Mortgage Or Tracker Mortgage?

A fixed-rate mortgage ensures that the interest rate remains unchanged for a specific time frame, usually two, three, or five years. It doesn't matter how the Bank of England base rate fluctuates, your interest rate will remain stable throughout the duration of the fixed rate.

This type of mortgage can be useful for budgeting as it allows you to know precisely how much you need to pay each month.

On the other hand, a lifetime tracker mortgage means that your monthly payments will change if the base rate changes.

Both types of mortgages have a fixed agreement period, and if you want to switch mortgages earlier, you'll have to pay an early repayment charge (ERC).

It's essential to understand the duration of the mortgage and when you can remortgage without incurring any financial penalty before obtaining any mortgage.


This article is intended to provide a general understanding of the topic. The contents should not be treated as advice.

Accelerated Finance Limited only considers applications for commercial or investment properties.

Accelerated Finance Limited is not regulated by the financial conduct authority and only provides unregulated loans via our network of lenders. Your property is at risk if you fail to make payments on a Mortgage Contract. Please note that Accelerated Finance Limited and its employees do not give financial advice or recommendations on any product.

Author: Aakash Nagrani - Director 

Aakash Nagrani Author
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