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Standard Variable-Rate Mortgage

Learn about standard variable-rate mortgages

  • What happens when your existing deal comes to an end

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What is a standard variable-rate mortgage?

A standard variable rate (SVR) is a variable-rate mortgage that you’ll usually be moved on to once your existing fixed-rate, tracker, or discount mortgage ends. This will be the case unless you choose to switch to a new deal.

All mortgage providers have an SVR. Bear in mind that the interest rates on a standard variable-rate mortgage tend to be higher than most mortgage options. If you don’t remortgage or switch deals before the end of your current deal, you may be faced with heftier monthly instalments.

Instead, if you choose to stay on this variable rate, you could find you’ll be paying more for your mortgage each month than if you were to shop around and look for a better deal. So it is always wise to read your lender’s conditions and know where you stand. This way, you can plan your exit and get a cheaper deal.

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How does a standard variable-rate mortgage work?

Mortgage lenders set their own standard variable rates. This, along with your mortgage repayments, can go up or down at any time.

Although the SVR can be influenced by changes in the Bank of England base rate, unlike tracker mortgages, SVRs don’t track above the base rate at a set percentage. As such, SVRs don’t have to strictly follow it.

Instead, other factors such as the lender’s cost of borrowing can influence the SVR. What’s more, the lender can choose to raise or lower their SVR whenever they want.

This means that, if the base rate rose by 1%, a lender might decide to:

  • Increase their SVR by 1%

  • Increase their SVR by more than 1%

  • Increase their SVR by less than 1% (less likely)

  • Leave the SVR unchanged (unlikely)

Similarly, if the base rate went down by 1%, a lender might choose to lower their SVR by 1% or less. They may even not lower it at all.

Can I take out a standard variable-rate mortgage?

Yes, you can go straight on a standard variable-rate mortgage, rather than a fixed-term deal. But it is fair to say that this is a fairly rare option, as this type of mortgage is unpredictable. Not only is it influenced by the Bank of England’s base rate, but it can also oscillate at the lender’s discretion. For this reason, most borrowers tend to opt for a rate that they feel comfortable with and that offers them much-needed peace of mind.

However, if you want flexibility, a standard variable-rate mortgage may be the right temporary solution for you. By taking out a standard variable-rate mortgage, you generally won’t be held by any restriction if you decide to move to another deal or provider. So if you plan to refinance substantially in the coming two years (which is usually the minimum fixed term you can go for), you can do so freely.

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What to watch out for

As mentioned, most SVRs are not particularly competitive. As the SVR can go up or down at any time, budgeting each month can be difficult. If this is something you’re not comfortable with, you may prefer to switch to a fixed-rate mortgage where you can lock in the rate for two, three, five, or sometimes ten years. This way, you’ll be safe in the knowledge that your monthly repayments will stay the same during that time.

Alternatively, if you’re happy to stay on a variable-rate mortgage, you may prefer to look for a more competitive tracker deal. This tracks at a percentage above the base rate and follows its movements for a set time. However, you can also get lifetime tracker deals which last for the duration of the loan.

You won’t be charged a fee to come off your lender’s SVR. But keep in mind you will need to pay arrangement fees and other charges when you switch to a new mortgage. Make sure you factor in these fees when comparing deals. In fact, you may find it cheaper to choose a mortgage with a higher interest rate but lower fees.

Advantages of a standard variable-mortgage rate

Some benefits of a standard variable-rate mortgage include:

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    Lower arrangement fees

    Your mortgage might have lower arrangement fees than a fixed-rate or tracker deal

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    Overpay your mortgage, fee-free

    You can overpay or clear your mortgage without having to pay a fee

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    Repayments can decrease with interest rates

    If interest rates go down, your mortgage repayments may go down too

Disadvantages of a standard variable-mortgage rate

Possible disadvantages to a standard variable-rate mortgage include:

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    Price fluctuations

    Your mortgage provider’s standard variable rate is likely to increase and decrease during the mortgage deal. This can make it difficult to budget for your monthly payments

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    Payments may increase by too much

    If the mortgage payments increase by too much, you might find that you struggle to afford them

  • Not the best deals on the market

    SVRs are generally not known for being the most competitive rates on the market. So you’re likely to find something better by switching

Comparing mortgages

Comparing mortgage quotes can help you find the right deal for you. You can use MoneySuperMarket’s mortgage comparison tool to compare variable-rate deals and fixed-rate mortgages over a variety of different terms.

You’ll then be able to filter mortgage types by initial monthly cost to help give you an idea of the mortgage repayments you might be making.

It’s a good idea to factor in the cost of fees when comparing mortgages, as these can vary dramatically depending on the deal.

Keep in mind too that the quotes shown won’t take into account your financial situation and credit history. So if you decide to proceed with getting a mortgage in principle offer, as well as an actual mortgage offer, the rate and terms you’re offered may be different.

Standard variable-rate mortgage rates don’t have a lock-in period or any other restrictions you might get with a fixed-term mortgage.

This means you are free to move on to a more competitive deal whenever you are ready. You won’t have to pay an (ERC) for switching.

Of course, every house-buyer has their own needs and circumstances. But there are different situations in which a standard variable-rate mortgage might act as a good short-term solution.

For example, if you’re in the process of moving home and haven’t yet found a portable mortgage that ticks the right boxes, this type of mortgage could come in handy. It may also be useful should your moving date not match the end of your existing mortgage term.

In fact, with a standard variable-rate mortgage you have more time and flexibility to scour the market and identify the best option for you and your property. What’s more, you won’t have to pay fees or any early repayment charges once you’ve finally selected the right mortgage deal.

If you don’t know what your mortgage’s standard variable rate is, you can get hold of this information quite easily.

If you still have the paperwork from your mortgage application and arrangement, you can usually find the lender’s standard variable rate there. If the information isn’t there, just get in touch with your mortgage provider – they’ll be able to tell you all you need to know.