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Almost a third of first-time buyers are considering using a tracker or variable rate mortgage to save money as the market fluctuates, data suggests.

In July, rates monitor Moneyfacts says 31.3 per cent of first-time buyers looking for mortgages using its comparison site were considering trackers and other variable deals, compared with just 9.5 per cent in February.

Unlike fixed rates, where payments are locked in for two or five years, tracker mortgages follow the Bank of England base rate, plus a certain percentage on top.

For example, someone might be given a tracker mortgage at base rate, currently 3.75 per cent, plus 0.3 per cent so the overall rate would be 3.78 per cent. But if the base rate increases to 4 per cent, it would change to 4.03 per cent.

The key benefit of trackers and variable rates is that they usually don't come with early repayment charges, so borrowers are free to switch away if they find a better deal. This makes them popular in times of market uncertainty.

The change in preference comes amid fixed rate mortgages moving higher in recent weeks.

Cheaper route: More first-time buyers are considering tracker mortgages in a bid to lower their monthly costs when buying

The lowest fixed rate deals for those with deposits of at least 40 per cent start from 4.32 per cent while the lowest tracker rate is currently 3.99 per cent.

The lowest two-year fix for someone with a 10 per cent deposit is 4.81 per cent, which is more expensive than some variable rates.

Meanwhile, West Brom building society is offering a discounted variable rate of 4.49 per cent.

Discount rates follow each lender's standard variable rate, but add a discount on top. The SVR is the higher rate that people fall onto when their fixed rate period ends and they don't switch to a new deal.

Moneyfacts says the proportion of first-time buyers looking at trackers and discount rates remained below 10 per cent throughout the spring before climbing as fixed mortgage rates increased.

How a tracker could save first-time buyers £111 a month

For someone buying with a 10 per cent deposit, the average two-year fixed mortgage rate has increased from 5.09 per cent in February to 5.74 per cent in July.

For a first-time buyer borrowing £200,000 over a 25-year term, this means monthly repayments have increased from around £1,180 to £1,257.

The average new two-year tracker rate for someone buying with a 10 per cent deposit stood at 4.8 per cent in July, resulting in monthly repayments of around £1,146 on the same loan.

This would mean a saving of around £111 per month, or more than £1,300 a year, compared with the average equivalent fixed-rate mortgage.

A similar trend has been noted by mortgage lender Santander. It says one in 20 of all its mortgage customers are opting for trackers at present. That's up from just one in every 35 customers this time last year.

'The big jump in first-time buyers researching tracker mortgages reveals the pressure higher fixed rates are putting on the budgets of hopeful homebuyers,' said Adam French, head of consumer finance at Moneyfacts.

'For many borrowers, saving more than £100 a month compared with a fixed-rate deal could make the difference between being able to buy a home or delaying their plans.

'Right now, many tracker mortgages look attractive because they are priced at around one percentage point above the Base Rate, making them noticeably cheaper than equivalent fixed-rate products.

'However, borrowers need to remember that today's monthly payment is not guaranteed to last.'

Using a tracker successfully also relies on the borrower to be proactive and switch their mortgage if the rate is no longer favourable, so they are not for those who shy away from financial admin.

What's the risk?

Tracker rates' reliance on the Bank of England base rate means there will always be a degree of uncertainty. While discount rates are dictated by the lender, they tend to rise and fall in reaction to interest rate moves.

The Bank of England has held interest rates at 3.75 per cent since December 2025.

It was expected to begin cutting the rate earlier this year, but the conflict in the Middle East has raised inflation fears.

While inflation was 2.6 per cent in the 12 months to June, it is expected to rise in the second half of the year, which could prompt the Bank of England to hike the rate to 4 per cent - in fact three of its Monetary Policy Committee voted to hike rates last week. The other six voted to hold at 3.75 per cent.

Further inflation shocks could send interest rates yet higher, and traders are betting on one or two rate hikes in the second half of the year.

However, there is also every chance they will maintain the status quo or even start cutting rates if concerns around economic growth and unemployment levels rise.

'Money markets are currently pricing in a couple of Base Rate hikes over the coming months,' added French. 'If those expectations prove correct, tracker mortgage repayments will rise too.

'Recent years have also shown how our volatile times can quickly move the outlook for interest rates, so anyone considering a variable mortgage needs to ensure they have enough room in their budget to cope with higher monthly repayments.

'While some borrowers may be prepared to accept that uncertainty in return for lower initial costs, others will value the security of knowing exactly what they'll pay each month.

'The right choice ultimately depends on individual circumstances, but anyone stretching themselves to get onto the property ladder should carefully consider whether they can still afford their mortgage payments if interest rates move higher.'