Fixed vs. Tracker: Decoding the Jan 2026 Rate Inversion
The old rule of thumb was simple: Trackers follow the Base Rate, Fixes follow value. But in 2026, we are seeing a "Rate Inversion" that complicates the decision for remortgagers.
The Inversion Explained
Usually, short-term flexibility (Trackers) costs slightly more than long-term security (Fixes). However, markets currently anticipate the Bank of England Base Rate to fall further later this year.
This means 5-Year Fixed rates (priced on future swap rates) are actually cheaper today than the current Base Rate. Lenders have already "priced in" the cuts.
The Case for Fixing
- Instant certainty.
- Currently the lowest rate on the market (sub-4%).
- Protects against inflation "stickiness".
The Case for Tracking
- Benefit immediately if the Base Rate crashes.
- No Early Repayment Charge (ERC) on many products.
- Gamble that rates go lower than 3.5%.
Our Verdict
For most households, the "Bird in the Hand" theory applies. A 5-year fix at ~3.7% is historically good value. Waiting for a tracker to beat that involves significant risk for marginal gain.
Whatever you choose, the priority must be escaping the SVR (7%+). Debating 3.7% vs 3.5% is irrelevant if you are currently paying 7.5%.