Standard variable rate or SVR is a term given to the rate that lenders base all their products on.
This rate is not generally offered to new customers, however it is the rate that existing customers whose deal has expired may revert to.
When you first borrow money from a lender, they usually offer you some kind of incentive to choose them, rather than one of their competitors. This could be a ‘Discount’ or ‘Free Valuation’, or ‘Cashback’ for example. In return for this incentive, the lender will often apply a penalty (or Early Repayment Charge as it is known in the trade) if you leave them before the Discount has finished, for example.
Please note the graph below is for illustrative purposes only.
There is a huge difference between Lender’s Standard Variable Rates – some as low as 2.5% with others over 5%!
The Standard Variable Rate is usually where the lender makes their highest profit margin and the longer borrowers stay on this rate the better (for the lender)!
So, as soon as your mortgage deal ends and you revert to the Standard Variable Rate with your lender, as long as you have no Early Repayment Charge, you should always consider reviewing your mortgage. This is a service we offer all of our customers to ensure that you always have the most suitable mortgage deal available to you at any review.
Please note that if the Bank of England interest rate changes, it is likely that Lenders will alter their own Standard Variable Rates – but as they are in control of their own SVR, they can alter by different amounts!
If you have a Standard Variable Rate and interest rates fall, then your monthly mortgage payments will also fall. There are usually NO Early Repayment Charges, allowing you to make unlimited overpayments without incurring a penalty
If interest rates rise, then your monthly mortgage payments will also rise. There will nearly always be a better rate available to you (e.g. Discounted or Tracker)
If your mortgage is on your Lender’s Standard Variable Rate, then do call one of our expert mortgage advisers today on 01271 346123 to see if we can find you a more suitable deal on your mortgage!