The standard variable rate is each lender’s own default mortgage rate. It is the rate you automatically move onto once any initial deal period (such as a fixed rate or tracker) comes to an end. SVRs are set by the lender and can be changed at any time, at the lender’s discretion, though they tend to follow the general direction of the Bank of England base rate.
SVRs are almost always significantly higher than introductory deal rates. As of recent years, most lenders’ SVRs sit several percentage points above the best available fixed and tracker rates. This makes staying on the SVR one of the most expensive ways to have a mortgage, and it is one of the main reasons financial advisers recommend remortgaging before your deal expires.
That said, the SVR does offer one advantage: flexibility. There are usually no early repayment charges on the SVR, so you can overpay, switch deals, or move lender without penalty. Some borrowers choose to stay on the SVR briefly while they arrange a new deal, particularly if they are in the process of selling or remortgaging.
Your two-year fix at 4.0% ends and you revert to your lender’s SVR of 7.5%. On a £200,000 mortgage over 25 years, your monthly payment jumps from about £1,056 to roughly £1,478 — an increase of £422 per month. Remortgaging to a new deal at 4.3% would bring your payment back down to approximately £1,089.
Key Points
- The SVR is the lender’s default rate, applied when your initial deal expires
- It is almost always significantly higher than introductory fixed or tracker rates
- The lender can change the SVR at any time and is not tied to the base rate
- There are usually no early repayment charges on the SVR, giving you flexibility to switch
- Remortgaging before reverting to the SVR can save you hundreds of pounds per month