Standard Variable Rate Mortgages

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!)
Standard Variable Rate Mortgage

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.

Advantages of a standard variable rate mortgage

  • 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

Disadvantages of a standard variable rate mortgage

  • 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

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