New data shows 67% surge in the popularity of tracker mortgages over past three years

4 October 2024

New Freedom of Information data from the FCA, gathered by Quilter, the wealth manager and financial adviser, reveals a 67% increase in the number of tracker mortgages taken out over the past three years.

The figures show that the number of tracker mortgages taken out surged, rising from 118,818 in 2021 to 198,044 by Q1 of 2024.

This increase comes amid a period of economic uncertainty and fluctuating interest rates, prompting many borrowers to opt for tracker mortgages, which offer interest rates that follow the Bank of England base rate.

The data highlights a particularly strong growth in tracker mortgages with a two-year incentivised rate, which saw an 87% increase from 86,212 in 2021 to 160,787 in 2024. This trend suggests that borrowers are increasingly attracted to shorter-term incentives, due to expectations of stable or falling interest rates in the near future.

Conversely, expectations that rates will come down relatively quickly have meant that tracker mortgages with three-year and five-year incentivised rates have seen a decline. The number of three-year incentivised rate mortgages dropped by 66%, from 3,434 to 1,177, while 5-year incentivised rate tracker mortgages decreased by 26%, from 10,457 to 7,777.

Tracker mortgages with a 10-year incentivised rates experienced a modest growth of 4%, This slight increase suggests a steady, albeit limited, interest in long-term tracker mortgage incentives although these types of mortgage products continue to be less popular.

Charlotte Nixon, mortgage expert at Quilter says:

"The substantial increase in tracker mortgages, especially those with two-year incentivised rates, highlights a shift in borrower behaviour towards more flexible options and away from the popularity of fixed term mortgages. While shorter-term incentives can offer immediate financial benefits, it’s crucial for borrowers to consider the long-term implications and potential interest rate fluctuations. Similarly, they need to be mindful of any early repayment charges as what can seem good at the outset can quickly turn out to be less cost effective.

“You also must consider the emotional toll that a tracker mortgage might take on you. If you are prone to worrying about money, then you could find yourself getting overly fixated on the Bank of England base rate. The benefits of a tracker must be weighed against the security of knowing how much you will pay each month.

“For those considering tracker mortgages, it’s important to stay informed about market trends and seek professional advice to ensure that their mortgage choice aligns with their financial goals and risk tolerance.”