Is a Fixed or Tracker Mortgage Better for Contractors?
Is a Fixed or Tracker Mortgage Better for Contractors?
Blog Article
As a contractor, choosing between a fixed-rate and tracker-rate mortgage can be a tough decision. Each has its pros and cons, and the right choice depends on your income stability, risk tolerance, and financial goals.
Let’s break down both options to help you decide what suits your contractor lifestyle best.
What Is a Fixed-Rate Mortgage?
A fixed-rate mortgage locks in your interest rate for a set period—typically 2, 3, or 5 years. Your monthly repayments stay the same, offering certainty and stability, which is useful for budgeting.
Benefits:
Predictable repayments
Protection from interest rate rises
Peace of mind if your contract income fluctuates
Drawbacks:
Usually a slightly higher starting rate
Early repayment charges if you switch before the term ends
What Is a Tracker Mortgage?
A tracker mortgage follows the Bank of England base rate, plus a set percentage. When the base rate goes up or down, so does your mortgage payment.
Benefits:
Can be cheaper initially than fixed rates
Flexible options with lower early exit fees
Good if rates are expected to fall
Drawbacks:
Payments can increase if interest rates rise
Less stability—harder to budget with variable income
What Should Contractors Consider?
If your income varies, a fixed-rate mortgage might be safer for managing monthly costs.
If you're confident in your earnings and expect interest rates to drop or stay low, a tracker could save money.
Flexibility matters—if you think you may move or remortgage soon, look for deals with low or no exit fees.
Final Thoughts
There’s no one-size-fits-all answer. The best mortgage type for a contractor depends on your work patterns, financial goals, and risk appetite. A specialist broker can help you weigh your options based on your unique situation.
At Contractor Mortgage Solutions, we compare fixed and tracker options across contractor-friendly lenders—so you get the deal that works best for you.