Standard variable mortgages
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 normally 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. As the SVR is
usually one of the higher rates it is a good time to review your
mortgage if you are on a SVR.
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