If you’ve found yourself on a Standard Variable Rate mortgage, you could be paying more interest than you need to. The good news is that it’s not too late to act – you may be able to switch to a lower rate and reduce your monthly repayments. That being said, there are rare situations where you may want to stay on an SVR mortgage temporarily, which we’ll discuss later in this guide. If you’re on a Standard Variable Rate mortgage, read on to find out how these mortgages work, why you’re on one, and what you should do next to potentially reduce your monthly repayments.
What Does Standard Variable Rate Mean?
The Standard Variable Rate (SVR) is your lender’s default interest rate without any deals or discounts applied to it. Therefore, it tends to be the highest rate you can be on with your particular lender. It’s a variable rate which means it can go up or down at any time. Read on to find out more about how this works.
How Does a Standard Variable Rate Mortgage Work?
A Standard Variable Rate (SVR) mortgage isn’t a product you typically choose to be on from the outset – rather, it’s what you end up on if you don’t act before your initial mortgage deal ends. Most mortgages start as a fixed-rate or tracker deal, which you lock in for a predetermined period. Once this period ends, your lender will automatically move you onto their SVR if you fail to remortgage or switch to a new deal in time.
The SVR is not fixed. It can fluctuate up or down based on various factors, primarily the Bank of England’s base rate and the lender’s own pricing decisions. The latter point is worth bearing in mind – unlike other mortgage products, your lender can increase or decrease the SVR at their own discretion. As the SVR changes, so does your monthly mortgage payment – so if the SVR increases, your payments will go up, and vice versa.
The SVR tends to be the highest rate you can be on with your lender and you could be paying it indefinitely unless you choose to remortgage or switch to a new deal. Thankfully, if you’re eligible for a better deal you can switch as soon as you want without incurring an Early Repayment Charge, as you’re not locked into a specific product.
The majority of mortgage holders lock in a new deal before their introductory period ends to prevent them from being moved onto the SVR. However, if you’re already on the SVR, it’s not too late to find a better deal. Speak to one of our friendly advisors to see if you could save money by switching to a lower rate.
What is the Standard Variable Rate Today?
There isn’t just one Standard Variable Rate in the UK like there is with the Bank of England’s base rate. Instead, each lender sets their own SVR and can increase or decrease it at any time. As of September 2024, lenders in the UK have SVRs ranging from 7% to 9%, but be sure to check with your lender to find out exactly what your SVR is at the moment. As a general rule of thumb, SVRs tend to be around 2 to 3 percentage points higher than a lender’s fixed rates.
Will I Have to Pay to Get Out of a Standard Variable Mortgage Early?
As mentioned, you usually won’t have to pay an Early Repayment Charge when switching to a new fixed or tracker deal from a Standard Variable Rate mortgage. This is because you are no longer locked into a particular deal, you are just on your lender’s standard, flexible rate.
There may be a small admin fee if you switch to a new lender, but usually, the amount you’ll save by switching to a lower rate will far outweigh any costs.
What Should I Do if I’m on a Standard Variable Rate Mortgage?
The first thing you should always do when you’re on a Standard Variable Rate mortgage is see what rates are available to you elsewhere. To be sure you weigh up your options properly, speak to a mortgage broker who can access a wide range of deals. Here at Michael Usher Mortgage Services, we’re not affiliated with any particular lender, so we can see what deals are available to you from across the market and find out how much you could save. Let’s have a look at your three main options below.
- Stay on the SVR. Although this is rarely the right option, you can continue paying the higher SVR. A mortgage broker may advise a short wait if you’re likely to become eligible for better deals in a few months’ time, for example. Or you may want to stay on the SVR if you’re about to come into some money which you’ll use to pay off your mortgage. This is because you can usually overpay by as much as you want whilst on the SVR without being liable for an Early Repayment Charge.
- Remortgage. This is where you switch to a new deal with a new lender. By shopping around, you may be able to find a deal that is better than anything your current lender can offer you. Your mortgage broker will be able to search the market and tell you if it’s worth remortgaging with a new lender or not. If this is the route you take, your broker will also handle all the paperwork to ensure the process is seamless.
- Product Transfer. This is where you switch to a new deal with your current lender. You’ll typically be able to lock in a lower rate than the SVR, but it’s recommended to shop around before accepting this. There may be a lower rate available to you from a different lender, and with the help of a good mortgage broker, it’s easy to find out. You have nothing to lose and potentially a lot to gain by assessing all your options before accepting a deal from your current lender.lower rate than the SVR, but it’s recommended to shop around before accepting this. There may be a lower rate available to you from a different lender, and with the help of a good mortgage broker, it’s easy to find out. You have nothing to lose and potentially a lot to gain by assessing all your options before accepting a deal from your current lender.s alternative options a bit later but our friendly mortgage advisors are also here to help if you need us.
What Should I Switch to if I’m on a Standard Variable Rate Mortgage?
The two most common products to switch to from an SVR mortgage are a fixed-rate or tracker mortgage. Which one you should choose depends on many variables, so speak to a mortgage broker to find out which is right for your situation. Below, we’ll have a look at what each one is and how they compare to an SVR mortgage.
Fixed-rate Mortgage vs Standard Variable Rate Mortgage
A fixed-rate mortgage is where you lock in a rate for a specific period, usually 2, 3, 5 or 10 years. Your monthly repayment will remain the same throughout this time regardless of whether the Bank of England’s base rate changes – so if interest rates rise you’ll be protected. Therefore, these products offer the greatest amount of security and certainty as you know exactly what you’ll be paying each month. This is very different to a Standard Variable Rate mortgage, where the amount you pay each month can go up or down along with the base rate or at the lender’s discretion.
There’s much more to learn about fixed-rate mortgages, so be sure to read our guide, ‘What is a Fixed-rate Mortgage and Should I Get One?’
Tracker Mortgage vs Standard Variable Rate Mortgage
A tracker rate mortgage is similar to an SVR mortgage in that they’re both variable rate products. However, a tracker mortgage tends to be discounted and is therefore usually priced at a lower rate. The other key difference is that a tracker mortgage only tracks a specific interest rate, usually the Bank of England’s base rate. The rate will be set at a certain number of percentage points above the base rate, for example, 0.75% above. If the base rate rises or falls, your tracker rate will change accordingly. The SVR is also affected by the base rate, but unlike tracker mortgages, your lender can increase or decrease their SVR by as much as they want whenever they want.
There’s much more to learn about tracker mortgages, so be sure to read our guide, ‘What is a Tracker Mortgage and Should I Get One?’
How Do I Get off a Standard Variable Rate Mortgage?
As you’re not locked into a specific product on the SVR, you should be able to switch whenever you want to. One option is to ask your current lender what deals they can offer you, but as mentioned, you may miss out on a better deal elsewhere. Therefore, it’s recommended you speak to a mortgage broker who can search the market to see if you can save money by switching to a new lender. Your broker will compare other rates to what your lender is offering and make a recommendation. Whether you stay with your current lender or switch to a new one, your broker can handle the process for you to make it as easy as possible.
The Bottom Line
A Standard Variable Rate is the default rate with your particular lender without any discounts or deals. It tends to be the highest rate you can be on with your lender but it is flexible, and providing you’re eligible, you can switch to a new deal fairly easily. The chances are you’ve been automatically moved on to your lender’s SVR because you’ve come to the end of a fixed-rate or tracker deal. Although you may be able to secure a new deal with your current lender, now is a great opportunity to shop around to see if you can get a lower rate elsewhere. There are hundreds of lenders in the UK and we have access to a wide range of deals from across the market. Book a quick chat with one of our advisors to find out what rates are available to you and if you can save money by switching to a new lender.
At Michael Usher Mortgage Services, we’ve been helping people throughout Surrey, Hampshire and Berkshire for over 30 years! We’re not affiliated with any particular lender, so we can access a comprehensive range of mortgages from across the market to find a deal that suits your needs. We’ll guide you through the process and liaise with your lender, estate agent and solicitor to ensure your application goes as smoothly as possible, and we can also help to protect your mortgage with our FREE Insurance Service.
Talk to one of our friendly mortgage advisors for free to get going quickly. Our head office is on Frimley High Street, but we can also help you remotely via phone or video call if you’d prefer. We look forward to chatting with you!
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Your home may be repossessed if you do not keep up repayments on your mortgage. There may be a fee for mortgage advice. The precise amount will depend on your circumstances but will be agreed with you before proceeding.
