Tracker mortgages have seen a huge surge in popularity, with a 67% increase in borrowers snapping them up since 2021. New data from wealth manager Quilter reveals this significant shift in the mortgage landscape.

So, what’s behind this trend?

Let’s break it down:

Flexibility is Key: Tracker mortgages see your interest rate rise and fall in line with the Bank of England base rate. Unlike fixed-rate deals, they often come without early repayment charges – a big draw for those who don’t want to be tied to a fixed rate for years.

Economic Uncertainty Fuels the Shift: Quilter’s investigation, using a Freedom of Information request to the Financial Conduct Authority (FCA), showed the number of tracker mortgages soared from 118,818 in 2021 to almost 200,000 (198,044) by early 2024. This surge coincided with a turbulent economic period marked by fluctuating interest rates.

Short-Term Incentives Prove Irresistible: The data also revealed a clear preference for tracker mortgages with tempting short-term perks, like those lasting two years. In contrast, three and five-year trackers saw a dip in popularity. This suggests borrowers were strategically using trackers to navigate the choppy waters of high mortgage rates, while hoping for calmer seas and lower rates in the near future.

Expert Advice: Charlotte Nixon, a mortgage expert at Quilter, weighed in on the trend: “This shift to tracker mortgages, especially those with attractive two-year rates, shows how borrowers are searching for flexibility and moving away from fixed-rate deals.”

However, she also offered a word of caution: “While those short-term incentives look great on paper, it’s vital to think about the bigger picture. How will interest rate changes affect you in the long run? Are there any early repayment charges lurking in the small print?”

The Bottom Line: Choosing the right mortgage is a big decision. It’s not just about the numbers; it’s also about your peace of mind. If you’re thinking about a tracker mortgage, stay informed about what’s happening in the market and seek advice from a qualified professional. Make sure your mortgage fits your financial goals and your risk tolerance.