Should you ditch your Standard Variable Rate mortgage?

If you’re on a standard variable rate mortgage (SVR) you could be paying hundreds of pounds more every month compared to if you switched to a new mortgage deal.

Rebecca Gamble Consumer Journalist

When you’re on your lender’s standard variable rate mortgage, they decide the rate you’ll pay and those rates can be extremely high, particularly with rising mortgage rates. Here we answer all your questions: what is an SVR mortgage? How do you know if you’re on one? And can you save cash by switching to another deal?

What is a standard variable rate mortgage?

The standard variable rate (SVR) is the interest rate that you will be charged once the initial deal period of your fixed, tracker or discount mortgage ends unless you remortgage onto a new deal.

With an SVR mortgage, the amount that you pay can change at any time. You are at the whim of your mortgage lender, many of whom seem to view SVR rates as a license to print money – at your expense.

Standard variable rate mortgages are often extremely expensive. If you are on your lender’s SVR you could be paying hundreds of pounds a month more than if you remortgage to a better deal. So if your current mortgage deal is due to end in the next six months, or you’re already on a standard variable rate mortgage, start shopping around now to see if you can remortgage and save money.

How does a standard variable rate mortgage work?

Mortgage lenders set their own standard variable rates. These can be influenced by changes to the Bank of England base rate but unlike tracker mortgages, standard variable rates don’t track above the base rate at a fixed amount.

Plus, other factors like the cost of borrowing can influence what a lender sets its SVR mortgage rates at. And a lender can increase or decrease its SVR whenever it chooses to.

So if the base rate increases, a lender may pass on all of the increase to borrowers, some of it, none of it – or they could increase SVR mortgage rates by more than the increase to the base rate if they choose to. And if the base rate goes down, a lender may reduce its SVR mortgage rates by the same amount, by less or they may not reduce it at all.

Bear in mind, if your payments increase because the SVR mortgage rate has gone up, the extra money you pay each month will go towards paying the higher interest rate charged by your lender, not towards the capital. So you won’t be paying off your mortgage more quickly.

How long does a standard variable rate mortgage deal last?

SVR mortgages in the UK are usually flexible and don’t come with the same restrictions you’ll typically face with fixed term mortgages. This means if you’re rolled onto your lender’s SVR and your mortgage payments shoot up, you’re usually free to remortgage to a better deal without needing to pay an early repayment charge (although, always check). However, we strongly recommend remortgaging before your current deal ends to avoid rolling onto the standard variable rate at all. A remortgage can take about three months to arrange, and you don’t want to be paying the high standard variable rate at all, let alone for several months.

How can I find out what my mortgage’s standard variable rate is?

You can find out your mortgage standard variable rate on paperwork from your mortgage lender. If you can’t find it, contact them and they’ll tell you what the current SVR is. You can also find your SVR by using our online mortgage finder service powered by L&C – just click the “start online” button and enter details of your current mortgage to find your lender’s SVR and see the best deals available to you today.

Should I stay on the SVR?

SVR mortgage rates are extremely high in some cases and you should not stay on your lender’s SVR unless you’ve explored all your other options first.

Paula Higgins, chief executive of HomeOwners Alliance said in September 2023, ‘The staggering SVRs we are seeing from some lenders at the moment – up to 9.73% – is nothing short of daylight robbery. And if the Bank of England increases interest rates further, we could see SVRs soaring even higher.

‘So we’re calling on all homeowners to check the rate they’re on. If it’s the SVR, they need to look at their options asap. If your current mortgage term comes to an end in the next six months, start looking now to secure a rate and avoid defaulting onto the lender’s SVR.’

Paula also warns that standard variable rates are ‘completely inconsistent between lenders, making it harder for consumers to track’. An easy way to find out what SVR your lender charges is to use L&C’s Rate Check Service. L&Cs online mortgage finder will not only show you your lender’s SVR, it will show you the lowest rates from across the market; which deals you could be eligible for and how much you could borrow too.

What is the current standard variable rate?

There is no one current standard variable rate – each lender sets its own SVR mortgage rates in the UK. These vary widely by lender but the average current standard variable rate in the UK in September 2023 is around 8.5%. Standard variable rates have been increasing across the board since the Bank of England started hiking the base rate in December 2021. See our best mortgage rates for the latest on standard variable rates.

Which lenders offer the best standard variable rate mortgage?

Some of the best SVR mortgage rates available in September 2023 are below, along with an illustration of what your monthly mortgage payments would be, assuming a £200,000 mortgage over a 25 year term.

Worst SVR mortgage rates

By comparison, here are some of the worst SVR mortgage rates in the UK in September 2023.

To find out today’s worst offenders visit L&Cs SVR Watch.

How much will I pay on the SVR?

Not only do SVR mortgage rates vary between lenders, some lenders may have a ‘ceiling’ on their SVR mortgage rates. For example, the lender may state their SVR mortgage rates won’t rise above a certain percentage above the base rate. There may also be a ‘collar’ on the standard variable rate which means the interest rate you pay won’t drop below a certain amount. Each lender sets different rules, which is a key reason to speak to a mortgage broker for expert advice as they’ll explain your options.  

When might a standard variable-rate mortgage be right for me?

Everyone’s circumstances are different and some people may decide a standard variable-rate mortgage is a good solution for them. For example, if you have a small balance to pay off and it’s cheaper overall for you to stay on your lender’s standard variable rate. But don’t assume what the best option will be. Always speak to an expert to make sure you’re on the best deal.

Explore all your remortgage options. Speak to our fee-free mortgage partners at L&C or use the online mortgage finder service today.

Pros and cons of a standard variable mortgage

So what are the advantages of a standard variable mortgage?

Advantages of standard variable rate mortgage

Avoid arrangement fees

The best mortgage rates often come with mortgage arrangement fees, which can be £999 or even more. So, rolling onto the standard variable rate instead might seem like it will save you cash. But this could be an expensive mistake. If you speak to a mortgage broker, they’ll look at all your mortgage options. Any arrangement fee you’ll need to pay to take out a cheap mortgage deal may be outweighed by the savings you’ll make by being on a better rate. Plus, many fixed and tracker mortgage deals are available without arrangement fees too so a broker will look at the overall picture for you.

Fee-free overpayments

Some people choose a standard variable rate mortgage because they want to be able to make overpayments or even clear their mortgage without the risk of having to pay an early repayment charge. Most mortgages will let you make overpayments of up to 10% a year (but always check).

However, if you’re hoping to repay more than this or even clear your balance completely, don’t assume a standard variable rate mortgage is the only way to do this. Speak to our mortgage broker partners at L&C and they can look for deals that will let you make large overpayment amounts or pay your mortgage off early without facing an early repayment charge. It may be a standard variable rate mortgage is the best option – but at least if you go through the process you’ll know that for sure.

Repayments can go down

While your lender’s standard variable rate can go up, it can also go down, for example if the base rate goes down, which means you may see a reduction in your payments. However, if you were on a tracker mortgage, your repayments would also automatically go down if the base rate was cut.

Disadvantages of a standard variable rate mortgage

So what are the disadvantages of a standard variable rate mortgage?

• Standard variable rate mortgages tend to be the most expensive type of mortgage. So you may end up paying much more each month than if you took out a different type of mortgage. So if you stay on your lender’s SVR rather than remortgage to a cheaper deal you could end up paying thousands of pounds more than you need to.
• If you move onto your lender’s standard variable rate mortgage after your current mortgage deal ends, you may find your repayments shoot up.
• Your monthly repayments could increase at any time as your lender sets its own SVR. So if the base rate increases, your repayments may increase too. But your lender can increase (or decrease) its SVR whenever it chooses to so you could face a sudden increase in your mortgage payments.

What are the alternative mortgage types?

There are lots of different types of mortgages available. These include:

• Fixed rate mortgages: You take out a deal for a fixed period of time, usually 2, 3 or 5 years or more, and the interest rate you pay won’t change during the initial term. This means the rate you pay won’t increase, but it won’t go down either.
• Tracker mortgages: The rate you pay is linked to the Bank of England base rate. So if interest rates increase or decrease, the rate you’ll pay will increase or decrease by the same amount. Again, you’ll take it out for a fixed period of time.
• Discount rate mortgages: This is similar to a tracker mortgage, but offers a discount on the lender’s own standard variable rate (SVR).  
• Offset mortgage: An offset mortgage is a mortgage which is linked to a savings account. The balance on these savings are then used to reduce the interest charged against the mortgage (thereby saving money). This is different to a ‘conventional’ mortgage in which interest is charged against the total borrowed amount.

Find out more information in our guide on Understanding mortgage types and what one you need to get.

Can I take out a standard variable rate mortgage?

Yes. Many lenders will let you take out a standard variable rate mortgage. Some people opt to take out a standard variable rate mortgage as a temporary solution as they can offer flexibility and you won’t usually be restricted if you want to switch to another provider. But don’t assume this is the best option without speaking to a mortgage broker. There may be other mortgages available offering the flexibility you want at a better rate.

How a broker can help you find the best standard variable rate

If you’re considering a standard variable rate mortgage, don’t assume you must stick with your current lender because SVR mortgage rates vary considerably between lenders. The quickest way to do this is to speak to our fee free mortgage broker partners at L&C. They’ll compare the best mortgage rates and terms. And, they’ll also be able to tell you about any other mortgage types that may offer what you are looking for at a cheaper rate.

Standard variable rate calculator

If you want to compare how much you’re paying on the standard variable rate compared to what you’d pay if you remortgage, the quickest way to do this is to use L&C’s online mortgage finder Rate Check service.

Frequently Asked Questions