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.
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 re-mortgage 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.
- When interest rates are low, your payments may go down
- Arrangement fees for SVR mortgages tend to be lower than for trackers or fixed rates. There may be no arrangement fee charged at all
- There are generally no Early Repayment Charges, which allows for flexibility if you want to overpay, pay off the mortgage early, or re-mortgage to a new deal
- 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
- 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