Finance glossary
Variable Rate
Also known as: Tracker rate, Discount rate
In simple terms
A variable-rate mortgage has an interest rate that can go up or down over time, so your monthly payment can change — sometimes following the Bank of England base rate, sometimes at the lender’s discretion.
On this page
What does variable rate mean?
A variable rate is a mortgage interest rate that is not fixed, so it can change during the deal. The two most common types are a tracker, which follows the Bank of England base rate plus a set margin, and a discount, which is set at a fixed amount below the lender’s standard variable rate.
Because the rate can move, so can your monthly payment. When rates rise your payments rise; when they fall your payments usually fall too.
How a variable rate works
A tracker moves directly with the base rate — if the base rate goes up by 0.25%, so does your rate. A discount tracks the lender’s SVR, which the lender can change more or less at its own discretion, so a discount is less predictable than a tracker.
Variable deals often have lower or no early repayment charges, giving more flexibility to overpay or leave, though some tracker deals still tie you in for an introductory period.
How could this affect me?
A variable rate can be cheaper than a fix when rates are stable or falling, and it usually gives more freedom to overpay. The downside is uncertainty: you have to be able to cope if payments go up.
If your budget has little room to absorb a rise, the certainty of a fixed rate may suit you better. If you have headroom and want flexibility, a variable deal can work well.
Things to watch out for
- Your payments can rise with little notice — budget for increases, not just the current rate.
- A discount tracks the lender’s SVR, which the lender can move at its discretion, so it is less predictable than a base-rate tracker.
- A low introductory discount can jump sharply when the deal period ends.
- Some trackers have a “collar” that stops the rate falling below a set floor even if the base rate drops.
General information, not personal advice
Consumer Credit is an independent information service. We do not provide regulated financial advice or sell financial products. For advice on your own situation, speak to an appropriately authorised firm or a free service such as MoneyHelper. About Consumer Credit.
Sources
We checked this page against these official and authoritative sources.
- MoneyHelper, Fixed, variable, tracker and discount mortgages explained (opens in a new tab). Accessed 22 Aug 2026.
- Bank of England, Interest rates and Bank Rate (opens in a new tab). Accessed 22 Aug 2026.