Standard Variable Rate Mortgage

The term standard variable rate mortgage refers to the interest rate mortgage deal you will have when your initial introductory rate ends. Every lender has a standard variable rate of interest on which it bases all of its mortgage deals. Think of it as the default interest rate, when no special rates have been offered. A lender’s standard variable rate mortgage interest is actually based on the Bank of England base rate, although it will usually be several percentage points higher. When the base rate rises, so will your standard variable rate mortgage, and likewise when the base rate decreases, you will see the results in your standard variable rate mortgage changes.

You may have noticed an unusual situation at the moment where the introductory mortgage interest rates are actually higher than the standard variable rate mortgage deals on the market. This is because the standard variable rate mortgage is currently tracking the (very low) base rate, whilst the introductory offer is set to be fixed for 2, 5 or 10 years. Interest rates are expected to rise as the economic situation improves, so you will find that by the time you revert to the standard variable rate mortgage from your introductory fixed rate, the lender’s standard variable rate will be higher once more. Unfortunately not many lenders would allow you to take the standard variable rate mortgage from the start of the mortgage term, as this would provide good value for money in the current climate. Usually, when you revert to a standard variable rate mortgage, you should shop around to see what else is available because the standard variable rate is hardly ever the most competitive interest rate in the market.

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Standard Variable Mortgage Rate: Quick Definitions

• You will revert to a standard variable rate mortgage at the end of your initial introductory mortgage term.
  
• Standard variable rate mortgages are indirectly linked to the Bank of England base rate – the lender uses the base rate as a guideline for setting all of their mortgage rates, but the standard variable rate will always be a few percent higher than the base rate.
  
• This standard variable rate mortgage will be set at a higher interest rate than that which you will be used to paying, because it is the lender’s default rate.  You are not tied in to stay with the lender at this point, and should look around to see if you can remortgage and find a better deal.