What is a Standard Variable Rate Mortgage (SVR)?
A standard variable rate (SVR) mortgage has an interest rate that is set by the lender rather than being linked to the Bank of England (BoE) base rate. Essentially, the lender has full discretion over the interest rate charged to the borrower.
While the interest rate in a SVR mortgage can be affected by fluctuations in the BoE base rate, the lender retains the discretion to adjust their rates independently. This means that when the BoE alters its base rate, the lender can choose to follow suit, disregard the change entirely, or even adjust their rates independently. It's worth noting that there are instances where the lender may decide to raise or lower their interest rates regardless of whether the BoE has made any changes.
The rate of interest charged on SVR mortgages can range from 2% - 7% above base rate, or more.
What is a Standard Variable Rate Mortgage (SVR)?
The lender can increase or decrease the mortgage rate that you are paying on a month-to-month basis, so you could end up paying more or less depending on their decision. This can make it difficult to budget in the future. However, on the other hand, being on an SVR allows you to have more freedom; you can overpay or leave your mortgage without fear of high penalties for doing so.
Usually, fixed term mortgages will revert to the lenders SVR rate at the end of the mortgage term. Which is why it is so important to speak to one of or mortgage advisers at least 6 months before your current deal ends, to avoid paying high SVR rates!
