Standard Rate Mortgages

When you are shopping around for mortgage, you will notice that there are two rates given, the 'initial rate' and the 'standard rate', which is usually much less competitive. Mortgage lenders will tempt in new customers with an attractive introductory rate, and they will do this either by offering a low fixed rate for a certain number of years, or a reduction on their standard rate mortgages. After the introductory rate, your rate would revert to one of the lender's standard rate mortgages.

So what exactly is a standard rate mortgage? Also known as the 'standard variable rate', this rate differs for each individual lender. To some extent, a lender's standard rate will track the Bank of England base rate, and will usually remain a few percentage points above it. Lenders are, however, under no obligation to pass on savings to the consumer when the base rate falls. When introductory rates revert to standard rate mortgages, this usually marks the end of the 'tie-in' period with the lender, meaning that you would be able to switch to a different product or lender without incurring penalties. Even if you are happy on the standard rate mortgage, it would be worth looking around to see what else is on the market because chances are, you could be getting a better deal elsewhere.

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The Facts about Standard Rate Mortgages

• The rate of a standard rate mortgage is likely to change as the base rate changes, although the extent of the change will depend on the lender. 
• Although in recent months, some lenders have seen their standard rate mortgages at a lower rate of interest than their introductory deals due to the low base rate, standard rate mortgages will usually be much higher than current deals in the market.
• Lenders will generally not offer their standard rate mortgages to new consumers.  This is usually a good thing, since the introductory deals are often much, much more competitive.
• At the point where you revert to a standard rate mortgage, you are usually no longer obliged to remain with your current lender, so get online and get shopping around!