A standard variable rate mortgage (SVR) is the most basic rate offered by banks or building societies. These products typically have the highest rates, with no discounts or a fixed set period. The rate increases or decreases directly after the Bank of England revises the base rate.
The SVR is effectively the standard mortgage rate offered, with most other products quoted as discounts against this rate. An SVR is the default rate that applies once a fixed deal period has expired.
Here's the current set of SVRs for the main loan providers in the UK:
The Skipton Building Society recently raised its SVR to 6.50% after it had pledged not to have its SVR at more than 3% above the Bank of England base rate.
As you can see from the table, many are already at this level. Once the BOE decide to increase the base rate, your mortgage will likely increase within a month after the announcement. However, this may be a shorter period of time, as it depends on the individual lender when the changes occur.
The main advantage is that the rate is published and variable, as the BOE rate fluctuates. There are, however, some big disadvantages, and market conditions have dictated that not all standard variable rates are the same. Some building societies and banks have dramatically increased their SVRs recently to increase the rates.
The actual rate can be anything a lender wants it to be, and although it generally follows the Bank of England rate, it is not a fixed percentage above this. As can be seen from the table above, there is a significant variation in standard rates among the main lenders in the UK.
Once most fixed or tracker rates have finished they will automatically be placed onto the SVR so a good deal may not be a great deal once the fixed term has been completed. Additionally if you are on a SVR the lenders can changed their rate at any time they wish and your mortgage will rise and fall as they see fit.
At present while interest rates are low and where many people have left their mortgage lapse to a low standard variable rate the costs are acceptable. Over time interest rates are likely to rise and if you can get a good long-term fixed rate then now may be the time to secure such a rate.
If you're a first-time buyer, moving house or have to remortgage for whatever reason then a SVR may be the way to go if this is all you can get but with higher loan to value (LTV) percentages it's always best to shop around. Also be aware to take account of any arrangement fees that lenders add on because these can make the comparable interest rate very high if you are paying such fees every two years or so.
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