What is SVR?

Just like a mobile phone contract, if you don’t pick a tariff then your provider would put you on their standard rates. This is the same as a mortgage product, if you don’t pick a new product with your Lender they will usually put you onto a their Standard Variable Rate (SVR). It is just the default product for most lenders.

Here are some key features of a variable rate:

• If you were to cancel your mortgage before the end of your ‘contract’ they are less likely to charge any fee for doing so.
• Unlike some of the other products this rate is set directly by the lender. If the Bank of England decide to change the ‘bank rate’, it doesn’t have to reflect in the SVR interest rate. For example, if the ‘bank rate’ were to decrease the lender does NOT have to pass this saving down to borrowers
• It can be difficult to budget fully for. Even though you get flexibility on the product you are less likely to know what you are going to be paying for your mortgage payments specifically.

Example

Here is a visual representation of what a Standard Variable Rate may look like when compared to any changes to the ‘bank rate’.

If you wish to discuss more about Variable rates why not book your free consultation now.