When you take out a mortgage it will normally be a fixed rate, tracker or discount mortgage with a fixed term of two or five years.
If you don’t remortgage when this term comes to an end, you’ll usually be switched on to your lender’s standard variable rate (SVR) mortgage.
SVR mortgages are often much more expensive than the original deals. Lenders set their own SVRs, which are loosely based on the Bank of England base rate but can go up or down at any time.
Sometimes customers may not even know they’ve come to the end of their mortgage deal and have been moved on to an SVR, which means they could be paying more without realising.
Some lenders move customers onto follow-on rates instead of SVR mortgages at the end of their initial term. While those lenders with SVR mortgages will generally apply the same standard variable rate to all customers, follow-on rates often vary according to the particular mortgage product you have, although they are still likely to be more expensive than rates during the initial term.
Analysis by MoneySuperMarket and Fluent Mortgages indicates that over one in 10 mortgage holders in the UK are on SVR mortgages when they apply to remortgage a property (11.97%)1.
With almost 11 million outstanding mortgages in the UK as of May 20202, this suggests that over 1.3 million people in the UK may have lapsed onto these more expensive tariffs.