There has been a 67% increase in the number of tracker mortgages taken out over the past three years, according to data from the Financial Conduct Authority.

A Freedom of Information (FOI) request by Quilter showed that the number of tracker mortgages taken out has surged, rising from 118,818 in 2021 to 198,044 by Q1 of 2024.

The FCA data revealed 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.

Quilter said this trend suggests that borrowers are increasingly attracted to shorter-term incentives, due to expectations of stable or falling interest rates.

“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,” mortgage expert at Quilter, Charlotte Nixon, said.

“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.”

Conversely, expectations that rates will come down relatively quickly have meant that tracker mortgages with three 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 five-year incentivised rate tracker mortgages decreased by 26%, from 10,457 to 7,777.

Nixon added: “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.”

---