What is a standard variable rate?
A standard variable rate is the default interest rate that every UK mortgage lender sets for its borrowers. It’s the rate you move onto once any introductory deal period ends, unless you remortgage to a new product. Each lender sets its own SVR independently, and they can change it at any time without needing to give a specific reason.
SVRs are influenced by the Bank of England base rate, but they don’t have to follow it exactly. A lender might choose to raise its SVR by more than a base rate increase, or not pass on a base rate cut in full. This lack of a direct link is what makes SVRs less transparent than tracker mortgages.
Why are SVRs so expensive?
Lenders use competitive introductory deals to attract new borrowers, but once those deals expire, the SVR acts as a revenue source. There is little competitive pressure on SVRs because most borrowers are expected to remortgage before their deal ends.
The difference between a good introductory rate and a typical SVR can be two to three percentage points or more. On a £200,000 mortgage, that could mean paying £300 to £400 more per month than necessary. Over a year, that’s potentially £4,000 or more in avoidable interest.
Who ends up on an SVR and why?
Many borrowers end up on their lender’s SVR simply because they didn’t remortgage in time. Life gets busy, and it’s easy to miss the end of your fixed or tracker period. Others may struggle to remortgage because their circumstances have changed — they may have lower income, reduced equity, or credit issues that make it harder to qualify for a new deal.
Some borrowers stay on an SVR deliberately because it gives them complete flexibility. There are typically no early repayment charges on an SVR, meaning you can overpay as much as you want, switch deals, or pay off the mortgage entirely without penalty. For some people, this flexibility outweighs the higher rate.
How to get off your SVR
The simplest way to leave your SVR is to remortgage. You can either switch to a new deal with your existing lender, which is called a product transfer, or move to a different lender entirely. In most cases, a product transfer is quicker and doesn’t require a new valuation or legal work, but it limits you to one lender’s products.
A whole-of-market broker like Clearview Mortgage Solutions can compare product transfers against deals from other lenders to make sure you’re getting the best rate available. We regularly help borrowers who have been stuck on SVRs move to much cheaper deals.
Set a remortgage reminder
The best way to avoid landing on an SVR is to start the remortgage process three to six months before your current deal ends. Most lenders allow you to lock in a new rate up to six months in advance, so you can secure a good deal well before your current one expires.
At Clearview Mortgage Solutions, we proactively contact our clients before their deals end to ensure they don’t end up on an SVR. Contact us for a free, no-obligation review of your current mortgage.