How To Get The Best Standard Variable Rate (SVR) Mortgages

In this article, we’ll look at the advantages and disadvantages of SVR mortgages, when opting for a lenders’ SVR might be the right decision and how to make sure you are on the best mortgage deal for your circumstances.

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.

Is a standard variable rate (SVR) the best option?

It really depends on your circumstances. There are several reasons why an SVR mortgage might be the right choice for you. For example, if your fixed term deal is coming to an end and your mortgage is nearly paid off, it may not be worth paying the arrangement and legal fees to switch to a new mortgage.

Likewise, you might be planning to move in the near future or be expecting to receive an inheritance that will allow you to settle your home loan in the coming months. In these circumstances, tying yourself into a new fixed rate mortgage with an early redemption charge (ERC) might end up costing you more.

Not all lenders offer SVR mortgages as a borrowing option. Indeed, most homeowners paying the SVR are doing so simply because their fixed term deal ended, and they haven’t yet remortgaged.

Could you save money by choosing 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, 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

Which lenders are currently offering the best standard variable rates?

It’s worth remembering that SVR mortgage rates are determined solely by the lender and are under no obligation to reflect the Bank of England (BofE) base rate. As such, they can move up or down without notice and can make long-term budgeting quite tricky. It’s not uncommon for mortgage lenders SVRs to be between 2%-4% higher than the BofE base rate.

With that said, let’s take a look at some of today’s cheapest SVR rates in the UK and what they mean for repayments. The payments in the table below assume a mortgage of £200,000 with a 25-year term.

How a broker can help you find the best standard variable rate

The smart way to check the whole of the UK mortgage market and find the best SVR option for your circumstances, is to speak to a broker. They will quickly compare all possible rates and terms, and often have access to exclusive deals not available directly from lenders.

More importantly, they’ll be able to provide advice as to whether you should remain on an SVR arrangement and what your alternatives are. To speak with a whole of market broker we work with about your circumstances, get in touch today.

Do you need a higher deposit for a standard variable rate mortgage?

Not always. If you are looking to take out an SVR mortgage, the lenders offering the best terms may insist on a deposit of 15% or more. But there are also lenders who will approve a home loan on their SVR with as little as 5% deposit.

Typically, though, you will move to your lenders’ SVR when your fixed deal ends. In this case, no deposit is required as you are just continuing with your existing loan but on new (usually higher) rates.

When making an initial application, you will need to meet your lenders’ eligibility criteria for:

• Affordability
• Income type
• Credit history
• Age

You can read more about eligibility criteria in our guide to mortgage applications.

It’s also worth bearing in mind that SVR mortgages usually have lower arrangement fees than other deals. Some have no arrangement fee at all.

Alternative mortgage types

It’s wise to approach a broker in the months before your fixed deal ends to give yourself time to weigh up your options. You should also look at other alternatives to an SVR mortgage, including:

• Fixed rate mortgages – You are tied in to fixed rate for a specific period of time so you know exactly how much your payments will be. Fixed rates typically run for 2, 5 or 10 years.
• Tracker rate mortgages – Similar to an SVR mortgage but the rate you pay tracks the BoE base rate.
• Discount rate mortgages – this is a type of variable rate which is reduced – or discounted – for a set period of time (typically 2-3 years) before reverting to the lender’s SVR

By comparison, the table below provides an illustration of the best fixed-rate and variable rate mortgage deals currently available.

The rates quoted above were correct at the time of writing and are subject to change at any time at the lender’s discretion. Speaking to a mortgage broker is the best way to keep track of the rates available at any given time.

Get matched with your ideal mortgage broker

There are only a handful of situations in which SVR mortgages are the best option. But it’s always worth considering them due to the flexibility they offer.

When it comes to mortgaging or remortgaging, it pays to speak to a broker to discuss your plans and ensure you make the best decision for the short, medium and long term.

Our broker matching service will assess your situation and then put you in touch with a broker who has extensive experience of helping people in your situation compare all variable and fixed rate deals to make a fully informed decision.

To get matched with your ideal broker call today on 0808 189 2301 or enquire online.