What is a Standard Variable Rate? - Mortgages - Guides | moneyfacts.co.uk


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What is a Standard Variable Rate?

Category: Mortgages
Author: Tim Leonard
Updated: 23/11/2018

A Standard Variable Rate is a type of mortgage interest rate that you are most likely to go onto after finishing an introductory fixed, tracker or discounted deal.

Some lenders will also let you take out a mortgage on their Standard Variable Rate.

How does a Standard Variable Rate work?

A Standard Variable Rate is (rather obviously) a type of variable rate – this means your payments can go up or down according to changes in interest rates.

Unlike a tracker, a Standard Variable Rate (or SVR) does not track above the Bank of England Base Rate at a set percentage.

The rate you pay on an SVR mortgage will be determined by your mortgage lender. So, if the Bank of England Base Rate went up by 1%, your lender could choose:
  • Not to increase the SVR
  • To increase the SVR (they could choose to increase this by any amount less than 1%, 1% exactly or even make an increase greater than 1%)
  • To decrease the rate (although this is certainly the least likely of the three options!)
Your mortgage lender may also increase or decrease their Standard Variable Rate at any time – not only after Base Rate changes.

When you're on a Standard Variable Rate mortgage you won't normally have to pay an Early Repayment Charge if you want to pay off your mortgage sooner or remortgage to a new deal.

However, SVRs can be quite expensive – certainly more so than the best tracker rate mortgages available. They also don't give you the payment security of a fixed rate, as the amount you pay can go up or down.

SVR mortgages: advantages and disadvantages

When interest rates are low, your payments may go down
If interest rates go up, so will your payments. Even an increase of just 1% could add up to £83 a month to your repayments for a £100,000 mortgage
Arrangement fees for SVR mortgages tend to be lower than for trackers or fixed rates. There may be no arrangement fee charged at all Standard Variable Rates are not famed as the cheapest mortgage rates available, so you may be paying more than the best tracker or discounted rate mortgages around
There are generally no Early Repayment Charges, which allows for flexibility if you want to overpay, pay off the mortgage early, or remortgage to a new deal

What next?

Search all mortgages
Compare the best variable rate mortgages
Speak to an independent mortgage adviser
Compare the best variable rate buy-to-let mortgages

Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.