Following the increase in interest rates on 5 July by 0.25% it is widely expected that most lenders will increase their standard variable mortgage rate by at least the same amount and indeed some have already done so. But what is a standard variable rate (svr) and how does it affect you?
The svr is typically the rate of interest that you would be charged by a lender if you were not on a special deal. The rate of interest varies and normally moves up and down in line with movements in the Bank of England base rate. This means that if you have a mortgage which is based on a svr your mortgage payments will fluctuate from time to time. However, if you took out a two- year fixed rate mortgage this is, by definition, not the lenders standard variable rate. The fixed rate will apply for the two year period and after that the lender would normally charge you their standard variable rate.
Most people would normally then be better off if they could get another special deal. At the time of writing (10 July 2007) standard variable rates are moving to in excess of 7.5% whereas you can still get fixed rate mortgages at less than 7.0%.
Many people are on svr mortgages...
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