Mortgages: Standard variable rate

Standard variable rate

Many people are stuck on Standard Variable Rate mortgages. That's a pity because it's usually the mortgage lender's highest rate!

We'll now go through the many different types of mortgage currently in the UK market. It's worth noting that, when comparing mortgages, it's best to compare the monthly amount you're quoted rather than comparing various interest rates on offer (the latter should be expressed as an Annual Percentage Rate, or APR). There are a number of different ways APRs can be calculated on mortgages so two mortgages that charges ostensibly the same rate of interest could result in two different monthly payments. However, when you compare costs of mortgages in this way make sure you also take into account upfront costs.

First of all, let's look at Standard Variable Rate (SVR). This is the standard rate of interest that lenders use and like it says, it is variable. This is because it is linked to the Bank of England base rate - so whenever that goes up, so will your mortgage rate and thus so will your mortgage payments.

However, SVR Mortagages aren't just linked to the base rate, they're usually set at around 1-2% higher. This makes this type of mortgage very expensive.

Most people don't choose an SVR mortgage; it's the rate you are automatically switched to when your initial offer period expires. For this reason it's good to think about re-mortgaging a few months before this would happen so you can take advantage of a better mortgage deal, but check you aren't tied in first. But it's never too late to remortgage to a cheaper deal just check the terms and conditions, first.

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