For most UK homeowners coming off a fixed-rate mortgage in 2026, the remortgage decision has three plausible answers: a two-year fix, a five-year fix, or a base-rate-tracker. Each is being offered by mainstream lenders at rates within a percentage point of each other. The right choice depends on what you think the Bank of England base rate will do over the next five years, and on how much volatility in the monthly payment you can tolerate.
This article works through the maths on a typical £300,000 remortgage with a 60 percent loan-to-value ratio at the rates available from the major UK lenders as of April 2026.
Where rates sit
The Bank of England base rate has been at 4.25 percent since November 2025, having come down from a peak of 5.25 percent in August 2024. The March 2026 MPC minutes indicated that further cuts depend on continued progress on services inflation, which printed at 4.1 percent year-on-year in the most recent ONS release.
The market-implied path for the base rate, as of mid-April 2026, is for two further 25 basis-point cuts by year-end, taking the base rate to 3.75 percent. The Bank's own market notices publish the implied forward curve based on overnight index swaps; this is the cleanest source for the price the market is putting on the rate path.
Mainstream lender rates for a £300,000 remortgage at 60 percent LTV in April 2026:
| Product | Initial rate | SVR after initial period | Arrangement fee |
|---|---|---|---|
| Two-year fix | 4.49% | ~7.5% | £999 |
| Five-year fix | 4.19% | ~7.5% | £999 |
| Two-year tracker (base + 0.49%) | 4.74% currently | ~7.5% | £999 |
| Lifetime tracker (base + 0.99%) | 5.24% currently | n/a | £999 |
The numbers above are illustrative and represent the median across the four major UK lenders as of the date of writing. Specific rates available to any individual borrower will depend on credit profile, property type and lender risk appetite.
The maths on a £300,000 remortgage
Monthly payments on a £300,000 25-year repayment mortgage at each rate:
| Rate | Monthly payment | Total cost over two years |
|---|---|---|
| 4.19% (5-year fix) | £1,617 | £38,808 |
| 4.49% (2-year fix) | £1,667 | £40,008 |
| 4.74% (tracker, current rate) | £1,710 | £41,040 |
The five-year fix has the lowest monthly payment today. The tracker has the highest. For the tracker to "win" over the next two years, the base rate would need to fall enough that the average monthly payment over those two years comes in below 4.49 percent (the two-year fix rate).
Since the tracker is base + 0.49%, the tracker rate falls below 4.49% when the base rate falls below 4.00%. The base rate is currently 4.25%. The market expects two cuts to 3.75% by year-end. If those cuts arrive on schedule, the tracker spends roughly the second half of 2026 and all of 2027 cheaper than the two-year fix. The expected total payment on the tracker over two years, assuming the market's implied path is realised, is approximately £39,800 - very close to the two-year fix.
The five-year fix wins on a level basis at today's rates, but locks the borrower in for five years. If rates fall faster or further than expected, the borrower is paying above the market rate for the back half of the term. The early repayment charge on a typical five-year fix is 5 percent in year one, falling to 1 percent in year five - so refinancing early is expensive.
What you are actually paying for in a fix
A fixed-rate mortgage is, financially, the lender selling you a put option on interest rates: you pay a premium (the spread above the equivalent tracker) in exchange for protection against rate rises. The premium is roughly the spread between the swap rate the lender pays to hedge the fix and the tracker rate.
For the 2-year fix at 4.49% versus the tracker at 4.74%, the borrower is being offered a 25 bp discount today in exchange for taking on the risk that the base rate will fall less than the market expects. For the 5-year fix at 4.19% versus the same tracker, the discount is 55 bp, but the term is longer.
The rational borrower's question is: how much is rate certainty worth to me? A borrower whose monthly budget cannot absorb a payment increase of more than £100 should fix. A borrower with significant slack in monthly cash flow can take the tracker and benefit from cuts.
The other features that matter
Three features beyond the headline rate that often get overlooked:
Overpayment allowance. Most mainstream products allow 10 percent overpayment per year without penalty. Trackers are sometimes more flexible, with no overpayment cap. For a borrower who expects to make significant lump-sum overpayments (a bonus, an inheritance), the overpayment terms can save more than the rate spread.
Portability. Most fixed products are portable, meaning the rate moves with the borrower if they sell and buy a new property. The catch: the portability only works if the new lender re-underwrites the borrower at the time of moving, and re-underwriting standards have tightened. For a borrower likely to move within the fix term, the tracker may be easier to exit.
Early repayment charge structure. The headline rate is what gets advertised; the ERC structure determines what happens if you need to break the fix. For a five-year fix, the ERC is typically 5 percent of the outstanding balance in year one, declining each year. On a £300,000 remortgage that is up to £15,000 of charge in year one. Trackers typically have no ERC, or a small flat fee.
The asymmetric risk
The implicit assumption in much remortgage advice is that the path of rates is symmetrically uncertain - rates could go up or down by similar amounts. As of April 2026, the asymmetry is real. The Bank of England has signalled that the next move is more likely to be down than up; the OBR's March 2026 forecast assumes the base rate ends 2027 at around 3.5 percent. A path of significantly higher rates from here would require a meaningful upside surprise to inflation, which most forecasters do not see in the data.
This asymmetry favours the tracker for borrowers who can absorb short-term volatility in payments. It does not change the answer for a borrower whose finances cannot tolerate an upside payment shock; that borrower should fix regardless of the asymmetry. But for the typical borrower with reasonable cash-flow slack, the tracker is the more rational choice in the current environment, and the five-year fix has more downside (locked into above-market rates if cuts arrive) than the two-year fix.