What is a standard variable rate mortgage?

Your mortgage’s standard variable rate (SVR) is the default interest rate after an introductory mortgage deal ends. Lenders set their own SVRs, which can change monthly and are typically higher than other rates. SVRs are influenced by the Bank of England base rate, but lenders have flexibility in setting them. This can lead to unpredictable repayments. Consider switching or remortgaging at the end of your deal to avoid higher costs. Always consult with your lender or a mortgage broker to explore your options.

How does a standard variable rate mortgage work?

With a standard variable rate (SVR) mortgage, the interest you’ll pay each month on your mortgage repayments will vary according to your lender’s SVR. If your lender’s mortgage SVR goes up, your monthly repayment will also increase. Unlike tracker mortgages, standard variable rate mortgages don’t track the Bank of England base rate at a set percentage. Instead, your lender decides the rate you pay. Therefore, if the Bank of England base rate goes up by 1%, your lender might choose to:

If your lender increases its SVR, your monthly mortgage repayments will rise accordingly. The extra money pays for the higher interest, so paying more doesn’t mean you’ll be paying off your mortgage sooner. It’s crucial to be sure you can cover these potentially higher repayments if you’re on a standard variable rate mortgage. Your home may be repossessed if you do not keep up repayments on your mortgage.

When your initial mortgage deal period ends, you may want to consider moving onto a new mortgage or another type of mortgage, such as a fixed rate, to potentially secure a lower interest rate and more predictable monthly repayments. Always explore your options for a new deal with your lender or a mortgage broker to find what’s best for your financial situation.

Advantages of being on the standard variable rate

Being on the standard variable rate (SVR) can be beneficial if you can handle the extra cost. It allows quicker mortgage repayment without early repayment charges, unlike fixed or tracker mortgages. SVR mortgages often have lower or no arrangement fees, saving you money upfront. Additionally, the rate may decrease based on market conditions, potentially lowering your monthly repayments.

Consult with Expert Mortgage Brokers to see if an SVR mortgage suits your needs.

Disadvantages of staying on the standard variable rate

SVR mortgages offer lower fees and repayment flexibility but come with higher interest rates and unpredictability. Even small rate increases can lead to higher costs, complicating budgeting. Unlike fixed-rate mortgages, SVR rates can rise unexpectedly, and lenders aren’t obliged to lower them if the Bank of England base rate drops, which could mean missing out on potential savings.

Taking these factors into account, it’s essential to weigh the pros and cons carefully and consult with mortgage experts like Expert Mortgage Brokers to determine whether an SVR mortgage is suitable for your financial goals and circumstances.

How can I remortgage to get off the standard variable rate?

Remortgaging is the most popular way to avoid your lender’s SVR (standard variable rate). If you’re on a standard variable rate mortgage, you could end up paying a higher rate once your initial deal ends. Switching to a new mortgage, such as a fixed-rate mortgage or a tracker mortgage deal, can be a cheaper way to pay off your mortgage.

Rates can rise or fall with variable rate mortgages, so considering a fixed or tracker option can provide stability in your monthly payments. An experienced mortgage broker can help you survey the market and decide which mortgage is best for you when switching to a new deal.

Take a look at our mortgage calculator for more information on the potential savings compared to staying on a SVR.