What is a standard variable rate?
A standard variable rate is the default interest rate every UK mortgage lender keeps for its borrowers. It is where you end up once an introductory deal runs out, unless you remortgage onto something new first. Each lender sets its own SVR, and it can move that rate whenever it wants without having to explain why.
The Bank of England base rate influences SVRs, but it does not bind them. A lender might push its SVR up by more than a base rate rise, or pass on only part of a cut. With no fixed link between the two, an SVR is harder to predict than a tracker mortgage, which sits a set margin above the base rate and moves only when it does.
Why are SVRs so expensive?
Lenders win new borrowers with sharp introductory deals, but once those deals expire the SVR quietly becomes a source of profit. Little competitive pressure lands on SVRs, because lenders expect most people to remortgage before their deal ends anyway.
The gap between a good introductory rate and a typical SVR can run to two to three percentage points, sometimes more. On a £200,000 mortgage that might be £300 to £400 a month more than you need to pay. Across a year, that adds up to £4,000 or more in interest you could have avoided.
Who ends up on an SVR and why?
Most people land on the SVR for a simple reason: they did not remortgage in time. Life gets busy and the end of a fixed or tracker period slips past unnoticed. Others find remortgaging harder than it once was, because something has changed. A drop in income, less equity in the home, or a knock to their credit can all make a new deal tougher to qualify for.
A few borrowers stay put on an SVR on purpose, because of the freedom it gives them. An SVR usually carries no early repayment charges, so you can overpay as much as you like, switch deals, or clear the mortgage altogether with no penalty. For some people that freedom is worth more than the higher rate.
How to get off your SVR
The straightforward way off an SVR is to remortgage. You can take a new deal with your current lender, known as a product transfer, or move to a different lender altogether. A product transfer is usually quicker and skips the new valuation and legal work, but it holds you to one lender’s range of products.
A whole-of-market broker like Clearview Mortgage Solutions can weigh a product transfer against deals from other lenders, so you know you are getting the best rate open to you. We move borrowers off SVRs and onto much cheaper deals most weeks.
Set a remortgage reminder
The surest way to avoid the SVR altogether is to start remortgaging three to six months before your current deal ends. Most lenders let you lock in a new rate up to six months ahead, so you can have a good deal secured long before the old one runs out.
At Clearview Mortgage Solutions, we get in touch with clients before their deals end so nobody drifts onto an SVR by accident. Contact us for a free, no-obligation review of your current mortgage.