Standard Variable Rate Mortgages

In this article, we’ll look at what a standard variable rate means, how it’s worked out, and why it might not be the best option for most borrowers. We’ll also compare current standard variable rates from some of the main high street mortgage lenders, and look at how using a mortgage broker can help you save money.

What is a standard variable rate mortgage and how does it work?

A standard variable rate, often called an SVR, is the rate you will be automatically switched to if you do nothing once your specific mortgage deal ends. It’s essentially the lender’s default rate, and is almost always higher than any of their other offers. The SVR is not tied to the Bank of England base rate in the same way that most tracker mortgages are. This means that although changes in the base rate are likely to be reflected in an SVR, a lender can increase their SVR at any time regardless.

Lenders hope that people will be enticed in by low fixed rates and offers and then pay more when the deal ends and they move to the SVR, but you’re under no obligation to stay with the SVR. As long as you are eligible, you can remortgage to another variable or fixed-rate mortgage when your current deal ends or is approaching its expiration date.

Should you ever stay on your lender’s SVR?

The main benefit of a standard variable rate mortgage is that you are never tied into a fixed term and will therefore not be eligible for early repayment charges. This could be useful if you are looking to move, and don’t want to commit to a new mortgage because you know you’ll be switching soon. It can also be a good option if you want the flexibility to repay your mortgage in full without any charges, for example if you are expecting an inheritance, or want to make overpayments of more than 10% without incurring additional fees.

A secondary advantage of standard variable rate mortgages is that they often come with no setup fees. A lot of mortgages nowadays carry offers on arrangement fees, or have options to incorporate them into the loan, so if this is the only reason you’re considering a SVR mortgage then a broker may be able to offer some more cost effective alternatives.

Could you save money by switching to a fixed-rate mortgage?

To get a rough idea of what your mortgage repayments would look like if you were to switch to a fixed-rate mortgage from an SVR, you just need to take the amount you have left to repay, your current interest rate and your current repayment amount. 

You can use the mortgage difference calculator to work out if you could potentially save money

How a broker can make sure you’re getting the best rate

If flexibility and freedom from early repayment charges isn’t something you need then in most cases it makes sense, if you can, to remortgage away from the standard variable rate to a better deal. Even if you do want to stay on an SVR mortgage, you may find there are better rates available from other lenders.

But how do you know whether or not to switch and where to find the best mortgage deals for you? That’s where a broker comes in. A mortgage broker can take a holistic look at your financial situation and goals and help you assess what type of mortgage product is best for you, whether that’s a SVR or something else. They can then access the whole of the market to compare deals across every single lender, identifying the most competitive rates.

If you have any specific requirements that might make finding a mortgage more challenging, such as bad credit, a property of non-standard construction, or income based on commission and bonuses or benefits, then don’t worry. We can look at your unique situation and match you with a broker who has the specialist knowledge and experience to help you access niche lenders and negotiate terms on your behalf.

What is the current standard variable rate for mortgage lenders?

Because standard variable rates are set at the discretion of the lender rather than being tied to the Bank of England base rate or another external marker, you often see more variation in rates between lenders than with other variable rate products such as tracker mortgages.

You can check the paperwork for your mortgage or contact your lender at any time to check their current SVR rate.

*Nationwide’s SVR is called a Standard Mortgage Rate (SMR).

** The Halifax Homeowner Variable Rate (HVR) is their new default rate.The Halifax SVR now only applies to mortgages applied for before January 4th 2011. These rates may not always be the same.

***The Santander Follow on Rate (FoR) is now the automatic rate when your deal ends for all mortgages taken out after 23 January 2018. SVR rate customers have the option to switch to the FoR. The FoR directly tracks the BoE base rate and the FoR and SVR may not always be the same.

What if you can’t switch to a better rate?

We often deal with customers who believe they may be what’s known as ‘mortgage prisoners’, as they’ve been told they are no longer eligible to apply for new products such as fixed rates or trackers.

Fortunately, there are initiatives being put in place to make it easier for these customers to break out of SVR jail and, as the issue becomes better understood, more lenders are willing to make offers to them.

If you’re stuck on a standard variable rate and have struggled to secure a cheaper rate in the past, the expert whole-of-market mortgage brokers we work with will be ideally placed to help you find a sympathetic lender, and secure you a much better rate.

Get matched with the right mortgage broker

As you can see, even if you do want to stay with a standard variable rate for the flexibility, it can still pay to shop around. Whether you want to save some cash for the short term or look into switching to a cheaper fixed deal, the right mortgage broker can help you find the terms and the rates that work for you.

Call us now on 0808 189 2301 or make an online enquiry and we can assess your situation and match you with the broker that’s right for you. All of the advisors we work with have been pre-vetted by us, and our broker matching service is completely free of charge, so get in touch today.