What is a standard variable rate (SVR) mortgage?
A standard variable rate is the default interest rate applied to your monthly mortgage repayments. If you're on a tracked or fixed rate mortgage, you'll automatically switch to your lender's SVR once your current deal ends.
Your lender is free to change their SVR whenever they like and by any amount. Usually they follow the Bank of England's base rate but they don't have. They may change it by a similar amount or perhaps more.
Standard variable rate mortgages usually aren't the cheapest deal on the market. If you're starting with an SVR or expecting to switch to one, it pays to research the market and keep you options open.
Types of variable rate mortgages
Before taking on such a big commitment, it's important to consider various types of variable rate mortgage on the market:
Variable rate mortgages
As the name suggests, variable rate mortgages vary their rate of interest throughout the length of the agreement. This has a direct impact on your monthly mortgage repayments and doesn't mean you'll pay your mortgage any faster. Variable rate mortgages come in all shapes and sizes, including the standard variable rate, capped rate, interest only options, discount mortgages and tracker mortgage deals.
Get your quoteStandard variable rate mortgages
A standard variable rate mortgage is the mortgage rate the lender decides for themselves. The rate may change alongside the Bank of England's base rate, but it usually adds a certain amount on top. You're free to overpay or switch from a standard variable rate mortgage without triggering fees and penalties.
Get your quoteCapped rate mortgage
A capped rate mortgage moves alongside the lender's standard variable rate mortgage, but the total rate tends to be higher. The reason for this extra cost is the added security -- you're paying for a maximum or "cap" that prevents the rate from rising above a set amount.
Get your quoteDiscount rate mortgage
Sometimes a standard variable rate mortgage comes with a discount for an introductory period, usually around two or there years. After this period, the mortgage will automatically switch the SVR, which could undo the savings you made. There might also be a fee for paying early or switching before the discount ends.
Get your quoteTracked rate mortgages
Another kind of variable rate mortgage, the tracker mortgage follows the bank of England's base rate with around 1% on top. Tracker deals typically last two or five years, after which they default to the standard variable rate. They tend to come with early repayment charges and you run the risk of being stuck with rising rates.
Get your quoteInterest only mortgages
With an interest only mortgage, you'll pay the monthly interest without paying any of the loan itself. These can be a low-cost option for introductory or interim periods, but lenders will want to see your plan for the next stage. Interest only mortgages can be fixed or variable, but after their initial period they'll turn into a standard variable rate mortgage.
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Keeping vs. leaving your SVR mortgage
Should you stay or should you go? Here's a breakdown of the main reasons you might switch or stick with your SVR:
Keeping your standard variable rate mortgage
The flexibility you get with an SVR mortgage allows you to switch when the timing is right for you, or when the right deal is offered. You might be expecting a windfall or inheritance to pay off your SVR mortgage in one go, or you may need to finalise your moving day before you devote time to researching mortgage deals.
If interest rates happen to be low and your SVR is in line with them, now might be the time to stay put. When you do decide to change, you can usually switch to a new deal without incurring a fee, so it might just pay to wait.
Leaving your standard variable rate mortgage
Most borrows don't pick an SVR deal from the start -- usually they switch to one after their current deal ends. At that point they typically find a new deal or remortgage. Standard variable rate mortgages often aren't the cheapest on offer, so it could make sense to find a fixed rate or tracker option that's a better match your needs.
If interest rates are expected to climb in the near future and you suspect your SVR to follow, you could switch to a new mortgage deal now without facing a charge.
Standard Variable Rate Mortgage Pros and Cons
Advantages
- Low Fees: Lenders know that SVR mortgages aren't the most tempting deal on the market, which is why they keep the arrangement fees relatively low and sometimes remove them altogether.
- Pay Early: You can usually make overpayments on an SVR mortgage without triggering your lender's early repayment charge (ERC). There's also typically no fee for switching to a new deal.
- Flexible Terms: If you're expecting to move soon or pay off your mortgage early, you might find an SVR the flexible option that suits your circumstances.
- Possible Decreases: If interests rates fall and your lender decides to follow suit, you could end up with smaller monthly mortgage payments than you expected.
Disadvantages
- Ups and Downs: As the name suggests, standard variable rate mortgages can vary month to month, meaning you won't be able to budget with certainty.
- Possible Increases: If interest rates rise during your mortgage term, your mortgage payments will likely follow. This means your payments can end up much higher than expected.
- High Rates: Standard variable rate mortgages usually come with higher rates in general. If you're starting with an SVR or about to switch, you could find the monthly repayments higher than you'd like.
- Property Risk: As with any mortgage or secured loan, you risk losing your home if you fall behind on your monthly repayments.
Do fixed rate mortgages offer better terms?
This all depends on your circumstances and the deals you're able to find. It's generally more expensive to start, overpay or leave a fixed rate mortgage than a standard variable rate mortgage, but the month-to-month cost is generally lower.
Fixed rate mortgage deals keep the same rate of interest until the agreement ends, even if the lender's rate of interest changes. This can be very affordable if it's set below the current interest rate.
Fixed mortgage deals are usually short term, lasting less than five years, so watch out as the end of your term approaches. The switch to an SVR or the cost of remortgaging could easily undo the savings you made.
Applying for a standard variable rate mortgage
1. Your Finances
Go through your income and outgoings to make sure you're ready to take out a mortgage. You should also check your credit file and address any errors or missing information.
Once you've settled on a property you'd like to buy, you can find the mortgage amount you need by deducting your available deposit from the asking price.
2. Compare Deals
Explore the mortgage deals that providers offer online. When it comes to SVR mortgages, make sure you're confident that the rate is fair and in line with the competition, and not far in excess of 2-4% above the base rate.
Check the APRC (not APR) for the total rate you'll pay on the loan.
3. Review Offers
Mortgage providers will request your employment details, income and details of your other commitments, and then begin sending you their offers. You should review each quote carefully and decide if the rate suits your circumstances.
Remember that the standard variable rate can go up at any time, so be sure you're able to adapt to any changes.
4. Make an Application
If you decide to proceed with a mortgage application, the lender will perform a full credit check, which will leave a mark on your credit file. They'll also request copies of your ID, proof of address, and pay slips or tax returns.
Lenders may also request an advice call to check you're able to afford the mortgage.
5. Check the Agreement
Double-check the terms of your mortgage agreement and make sure you can afford the monthly repayments. Remember that you risk losing your home if you fall behind on your payments.
Our expert says:
"Even though they're not obligated to change with the Bank of England base rate, most lenders will factor it into their standard variable rate and keep it competitive. Still, you shouldn't be a prisoner to your SVR deal. If you find the monthly repayments too high, use our mortgage calculator to compare rates and find a deal you can afford."
Frequently Asked Questions
What are standard variable rates like now?
Standard variable rates are usually around 2-4% higher than the base rate, hence the average SVR is about 8.5% as of August 2024. Some forecasters believe there'll be further reductions in mortgages rates in the latter part of 2024, but it's difficult to say when or by how much.
Each mortgage provider will publish its SVR on its website and will keep existing customers updated if it changes. The closer an SVR is to the base rate, the more it can be considered a fair deal in comparison to the wider market.
Do SVR mortgages always follow the Bank of England base rate?
Yes and no. The Bank of England recently reduced its base rate of interest to 5%, but a drop like this is no guarantee that lenders' rates will follow. They can be especially slow to budge if the change is small or a long time coming.
That said, it's unlikely there'll be no change at all in response to the Bank of England base rate. Changes in the opposite direction are even more unlikely.
If you're surprised to see no change, you might find it was already "priced in" back when future base rate changes were first announced.
Which lenders offer the best standard rate mortgages?
In mid-2024, HSBC and NatWest offered standard variable rate mortgages at 1-2% lower than Barclays, Halifax and Metro Bank. The difference may seem small, but it can add or subtract a few hundred pounds from your monthly mortgage repayments.
These fluctuations are no predictor of future rates, however, and lenders are free to change their SVR without notice. It pays to keep an eye on the market and use a mortgage calculator tool to stay up to date with the best deals.
How soon can I switch from a standard variable rate mortgage?
Because standard variable rate mortgages are the lender's default rate, they're not usually tied to a particular term and you're free to leave whenever you like. If you're not happy with your monthly payments, you could investigate other mortgage deals and switch without incurring a fee.
Look into other variable rate mortgages like the capped and tracker rate mortgage, as well as fixed rate mortgage options. These usually involve an arrangement fee, but may bring more peace of mind than your SVR deal.
How can I get a better mortgage deal?
One of the most important actions you should take before applying for a mortgage is to check your credit score. Make sure it's as strong as possible before you start making applications, with no errors and not too many recent searches or rejections.
Lenders use your credit history to assess your affordability and how much of a risk you present, which in turn affects the total APRC (annual percentage rate of charge) they'll offer you. The more hard searches in your recent credit history, the more your score could drop. One rejection can lead to another and the effect can snowball.
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Additional Information on Standard Variable Rate Mortgages
Want to learn more about SVR mortgages and whether they’re right for you? These trusted sources offer guidance and tools to help you decide:
