Standard
Variable Interest Rate Mortgage
With a standard variable rate (SVR) your mortgage lender sets the
interest rate you pay. The lender bases this rate on the Bank of
England's (BOE) base rate, and so when the BOE's base rate changes
the standard variable rate will change. The SVR is usually between
2 and 4 percent higher than the BOE's base rate, but varies from
lender to lender. The advantage of this is that when the BOE's base
rate is low your monthly mortgage interest repayments will be low.
Of course when the base rate is high you will be paying larger monthly
repayments. This is one of the ways the British economy is manipulated,
by controlling the populations spending.
With a variable rate mortgage you are able to switch lenders at
any time without being penalised with early redemption penalties.
If you start a mortgage with a different type of interest repayment
for an agreed term, once the term finishes you will go back to the
SVR. For instance if you agree to a fixed rate mortgage for a five
year term, at the end of the five years you will have to pay the
lenders SVR until the mortgage is repaid in full. For this reason
when you are choosing a lender the SVR should be one of the most
important factors to consider.
A standard variable rate is most suitable for someone who is likely
to shop around to get the lowest interest rates, by re-mortgaging
regularly. There are no redemption penalties with a SVR so you can
switch mortgage lenders with no charge.
|
