Which mortgage type suits your client?
Understanding the key differences between fixed, tracker and variable mortgages is essential for anyone studying CeMAP—especially for Units 3–6. In this article, we’ll explain each type clearly, highlight pros and cons, and give practical
🔒 What is a Fixed-Rate Mortgage?
A fixed-rate mortgage keeps the interest rate the same for a set period (usually 2–5 years). This gives borrowers consistent monthly repayments.
✔️ Advantages
- Payments stay the same—easy to budget.
- Good for clients who prefer stability.
⚠️ Disadvantages
- Usually higher starting rate than trackers or variables.
- Early repayment charges (ERCs) may apply.
Tutor Tip:
In Unit 4, always mention that fixed rates revert to the lender’s SVR after the deal ends—unless another product is chosen.
📉 What is a Tracker Mortgage?
A tracker mortgage “tracks” a benchmark rate—typically the Bank of England base rate—plus a set margin. The rate changes in line with the benchmark.
✔️ Advantages
- Potential for lower rates if the base rate is low.
- Transparent structure—clients know what it’s based on.
⚠️ Disadvantages
- Monthly payments increase if the base rate rises.
- Less predictable than a fixed-rate deal.
Tutor Tip:
Remember: a tracker is not the same as a variable. Trackers follow an external rate; variables are set internally by the lender.
⚙️ What is a Variable-Rate Mortgage?
Variable-rate mortgages allow the lender to set and change the rate at any time. They’re usually based on the lender’s Standard Variable Rate (SVR).
✔️ Advantages
- Often no fixed-term tie-ins—more flexible for switching deals.
- Initial rates may be lower than fixed options.
⚠️ Disadvantages
- Rate can change without much notice.
- Less stable for clients with strict budgets.
Tutor Tip:
In client scenarios, explain that lenders can change SVRs even if the base rate stays the same.
🧠 Choosing the Right Mortgage for Your Client
👤 Match to Client Profile
- Risk-averse: Fixed rate offers stability.
- Rate-savvy: Tracker may save money in low-interest environments.
- Short-term plans: Variable-rate could offer flexibility without ERCs.
📝 What to Consider in CeMAP Answers
- Interest rate behaviour over time.
- Client goals (e.g. stability vs flexibility).
- Fees, penalties and early repayment terms.
❓ Frequently Asked Questions
What’s the difference between tracker and variable mortgages?
Trackers follow an external rate like the Bank of England base rate. Variables are set internally by the lender and can change at their discretion.
Are tracker mortgages cheaper?
They often start lower when base rates are low—but rise if the base rate increases. Always assess long-term affordability.
Can I switch mortgage types mid-term?
Yes, but fixed-rate mortgages often include ERCs. Variable-rate deals usually offer more flexibility.
🧾 Conclusion: What CeMAP Students Should Know
Fixed, tracker and variable mortgages all have specific pros and cons. Fixed offers stable payments. Tracker gives flexibility linked to market rates. Variable allows lender-set pricing with fewer tie-ins.
When answering CeMAP questions, explain which type fits a given client’s financial goals, budget preferences and risk tolerance.
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