What Is A Standard Variable Rate?

12th May 2017

A Standard Variable Rate (SVR) is a mortgage lender’s default interest rate, which you’ll usually be moved onto once your initial mortgage deal has ended. An SVR is a variable rate that the lender can change at any time. To avoid paying the SVR, it’s a good idea to remortgage once your initial deal has ended.

What is an SVR

When you first get a mortgage, you’ll probably be offered an introductory interest rate for a fixed period. This could be a discounted variable rate or a low fixed rate, for example. When this period ends, you’ll usually automatically start paying the lender’s Standard Variable Rate (SVR), which is a standard interest rate decided by the lender. Each lender has their own method for calculating their SVR.

Compared to initial rates, SVRs tend to be quite high, and since they’re variable, they can move up and down. The SVR will often reflect movements in the financial markets - such as changes in the Bank of England’s base rate - but it can also be changed at any time by the lender.

Example: At the time of writing (12th May 2017), one of Halifax’s mortgage products has an initial rate of 1.94%, fixed for two years (based on a 25-40% deposit). After two years, you’ll be switched onto their Standard Variable Rate of 3.74% for the remaining mortgage term. As the rate is variable, remember that 3.74% is only the current rate at the time you’re taking out your mortgage, and it’s likely to change over time.

Remortgaging to avoid paying the SVR

It’s often possible to avoid paying the pricier Standard Variable Rate by remortgaging once your initial mortgage period is over.

Remortgaging is the process of switching to a new mortgage, usually to save money. By doing this, you should be able to benefit from a more competitive rate for an initial period.

While lenders often charge an Early Repayment Charge (ERC) if you remortgage during the initial period, once this period is over you should be able to move your mortgage without paying an ERC. Bear in mind that there are some costs and fees involved in remortgaging.

Example: You have a mortgage amount of £173,400, repayable over 25 years. Your initial deal has ended, so you’re about to be switched onto your lender’s SVR of 4.63%. Instead, you remortgage and get an initial discounted rate of 1.39%. Compared to paying your lender’s SVR, this saves you £3,500 per year during the new initial period.

Using Trussle to remortgage

Trussle can tell you whether now is a good time to remortgage. Use the mortgage calculator to see if you could save money by switching to a new deal. If the time’s right, you can use Trussle to find a new mortgage and manage the application process. Once your new mortgage is in place, we’ll keep an eye on things and let you know when it could be a good time to switch again in future, so that you’re never paying more than you should.

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