Standard Variable Rate Mortgages

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Following the increase in interest rates on 5 July by 0.25% it is widely expected that most lenders will increase their standard variable mortgage rate by at least the same amount and indeed some have already done so. But what is a standard variable rate (svr) and how does it affect you?

The svr is typically the rate of interest that you would be charged by a lender if you were not on a “special deal”. The rate of interest varies and normally moves up and down in line with movements in the Bank of England base rate. This means that if you have a mortgage which is based on a svr your mortgage payments will fluctuate from time to time. However, if you took out a two- year fixed rate mortgage this is, by definition, not the lender’s standard variable rate. The fixed rate will apply for the two year period and after that the lender would normally charge you their standard variable rate.

Most people would normally then be better off if they could get another “special deal”. At the time of writing (10 July 2007) standard variable rates are moving to in excess of 7.5% whereas you can still get fixed rate mortgages at less than 7.0%.

Many people are on svr mortgages because they have simply never thought to re-mortgage. They have not looked to see whether the lender that gave them the good deal two, three or five years ago is still giving them a good deal now that they are not on the rate they originally got.

The simple way to check that you are still getting a good deal is to use a mortgage comparison site. This will show you what the best deal available happens to be – it is better to check this than to just hope that it is the current mortgage that you have.

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