What is a Standard Variable Rate (SVR) Mortgage?

What is a standard variable rate?

A standard variable rate (SVR) is a type of mortgage interest rate that you are likely to go onto after finishing an introductory fixed, tracker or discounted deal. Some lenders will also let you take out a mortgage on their SVR, but this is usually the most expensive option.

All lenders have different SVRs, and because they’re variable, the rate can change at any time.

They also tend to be much higher than the rates on introductory deals, which is why it’s always recommended to remortgage to a new option before your current deal ends. But, if you’re about to move onto an SVR, here’s how they work.

How does a standard variable rate mortgage work?

The most important thing to know about SVR mortgages is that your payments can go up or down according to changes in interest rates.

Often this is tied to movements in the Bank of England base rate, but it doesn’t have to be; mortgage lenders set their own SVRs and can change them whenever they wish, with other factors including their own borrowing costs ultimately setting the rate.

Yet the base rate will undoubtedly have an effect. If it goes up, lenders will likely increase their SVRs in the coming weeks, and not necessarily by the same amount. Yet this also means that, if base rate goes down, so could the SVR.

It’s important to keep track of your lender’s SVR, particularly if you’re coming to the end of your initial mortgage term. This is because you’ll be moved onto it once your current deal ends.

You can stay on the SVR if you wish – you may like the flexibility, as you’re not tied to it and can move to another deal at any time – but bear in mind that this could lead to a hefty jump in repayments.

SVRs are often at least 2-3% higher than initial rates, which can have a huge impact on your borrowing costs.

Note that when you’re comparing the best mortgage rates, some lenders refer to the SVR as an ‘existing borrowers rate’, but they both mean the same thing.

Can you overpay on a standard variable rate mortgage?

Yes. Because you’re not tied in you can normally overpay as much as you want when you’re on an SVR, with no early repayment charge to worry about (note that this only applies if you move onto an SVR after an initial deal; if you apply for an SVR outright, there may be early repayment fees).

This means an SVR may be suitable if you’re considering paying off your mortgage soon, but just remember that they can be much more expensive in the meantime.

Should I fix or choose a standard variable rate?

This entirely depends on your own needs and circumstances. For most people, opting for a fixed rate mortgage will be the preferred choice – fixed rate deals tend to be much cheaper than SVRs, which means your repayments will be lower. Plus, because they’re fixed, you know exactly how much you’ll have to pay over that initial term, and you have a lot of choice over how long to fix your mortgage for as well.

As such, most people will remortgage to a new deal before they’re moved over to their lender’s SVR. That said, some people may choose an SVR for the flexibility, particularly if they’re planning on repaying a large chunk of their balance in the near future. To help make the right decision, read our guide on choosing the best type of mortgage.

Should I stay on a standard variable rate?

As above, this will depend on your requirements. If you’re thinking of repaying your mortgage soon and are happy to absorb any additional costs in the meantime, you may find it worthwhile to stay on your lender’s SVR. If you’re unsure, it’s worth speaking to a mortgage broker to discuss the options.

Is a standard variable rate mortgage right for me?

Moving to a standard variable rate mortgage might be right for you if:

• you want to be able to overpay as much as you want
• you’re planning on moving soon and don’t want to be tied into a new deal
• you can comfortably absorb any increase in mortgage costs
• you’re expecting mortgage rates to fall soon
• you value flexibility over set repayments.

If none of these apply, you may be better off searching for a fixed rate mortgage, or a discounted variable rate instead.

Should I speak to a mortgage broker?

A mortgage broker can be invaluable if you’re on the fence about an SVR mortgage. They can help you decide if this kind of deal is right for you, or if you should consider a product with an initial rate instead – and crucially, they can help you access exclusive products and rates that aren’t available to the public. They remove a lot of the paperwork and hassle of getting a mortgage too; find out more about whether you should use a broker in our guide.

Mortgage brokers are regulated by the Financial Conduct Authority (FCA) and are required to pass specific qualifications before they can give you advice. Speak to a mortgage broker today.