Moneybox Financial Management

Standard variable rate (SVR) mortgages

A standard variable rate mortgage offers the option of paying the lender’s standard variable rate (SVR) throughout the mortgage term. This rate increases and decreases in line with the Bank of England's base rate.

With a standard variable rate mortgage your interest payments are likely to rise or fall every time there is a change in the Bank of England's base rate. However, your lender may not pass on the change in base rate immediately. This can be to your disadvantage if the Bank of England base rate falls but the interest rate you are paying doesn't.

Most borrowers are transferred to their lender's SVR once their initial incentive rate period comes to an end.

Advantages of a standard variable rate mortgage

• They are simple to understand
• The rate is variable - so you benefit from interest rate falls
• There are often no early repayment charges if you switch from a standard variable rate mortgage unless it is a capped deal

Drawbacks of a standard variable rate mortgage

• Standard variable rate mortgages are often expensive compared with fixed or discount rates and since there may be discounted or tracker deals available without early repayment charges, there is little advantage in taking out a standard variable rate mortgage
• The unpredictability of interest rate movements may make it hard to budget
• The monthly repayments on your mortgage may rise rapidly if interest rates rise