There are several different ways that mortgages can set their interest rates:
Variable mortgage rates can change at any point, although they usually rise and fall roughly in line with the Bank of England Base Rate.
Fixed rate mortgages guarantee that the interest rate will not change for a set period, usually between one and five years.
Tracker mortgages have variable rates that follow the Bank of England base rate exactly. A mortgage set at 2% above the base rate would be 2.5% with the base rate at 0.5%. If the base rate later went up to 1%, the mortgage rate would change to 3%.
Discount mortgages offer a rate set at around one or two percent less than the lender’s standard variable rate. The rate will rise and fall with the lender’s standard variable rate, and the discount will last for a set period of a year or more.