standard variable rate

What is it?

Each lender has their own standard variable rate (SVR) mortgage which is set at their own discretion. SVRs are generally linked to the Bank of England base rate but tend to be between 1-2% higher.

What does it offer?

The SVR is regarded by some as the least complex kind of mortgage.

When is it worth considering?

Being on the SVR can offer flexibility and the option of making early or over-payments without Early Repayment Charge.

What should I be aware of?

We believe that many UK mortgage borrowers are paying their lender’s SVR but the popularity of this option is puzzling. If you are paying the SVR you could be paying more for your mortgage than you need to.

With an SVR there’s no guarantee that you will benefit from falls in the base rate. SVRs track changes in this rate - but not exactly, if the rate falls by 0.5% your lender isn’t obliged to reduce their SVR by the same margin. If the rate goes up however the lender may choose to raise the SVR immediately by the same amount.

There are usually mortgage deals around which can offer the same flexibility as an SVR deal but with lower rates of interest.

The SVR is also the interest rate you will pay for your mortgage once any special offer period - with a fixed, discount or tracker rate - comes to an end. Before you take out a mortgage make sure you know how long you could be tied to paying the SVR once your offer period is over.