Your home may be repossessed if you do not keep up repayments on your mortgage. Variable rate mortgage payments can increase if your lender raises their Standard Variable Rate. This can happen independently of Bank of England base rate decisions.
Quick answer
Variable rate mortgages are not fixed in price - your monthly payment can change at any time if the lender changes their Standard Variable Rate. Unlike trackers, which follow the BoE base rate, SVRs are set entirely at the lender's discretion. Most borrowers end up on their lender's SVR at the end of a deal period and pay more than they need to as a result. Moving to a new fixed or tracker deal before reverting to SVR is almost always financially sensible.
Mortgage advice note: This page provides general information only. For personalised advice, speak to an FCA-authorised mortgage adviser who can assess your individual circumstances.
Standard Variable Rate vs Tracker: The Key Difference
Both types have rates that move over time, but the mechanism is different:
- SVR: Set unilaterally by the lender. Can be increased or decreased at the lender's sole discretion. No external reference rate is contractually specified.
- Tracker: Set as a defined margin above an external benchmark (usually the BoE base rate). The lender cannot move the rate independently of that benchmark.
Trackers are more transparent because you know exactly what drives rate changes. SVRs are opaque - the lender can move them for commercial reasons at any time.
When SVR May Be Acceptable - Temporarily
There are limited scenarios where staying on SVR briefly makes sense:
- You are close to selling your property and want no early repayment charges
- You plan to make large overpayments that would exceed ERC-free allowances on a fixed or tracker deal
- You are mid-way through a property purchase and need flexibility for a short period
Outside these situations, most borrowers would benefit from switching to a competitive deal.
Discount Mortgages in Detail
A discount mortgage gives you the SVR minus an agreed discount for a set period. For example, SVR minus 1.5% for two years. At the end of the discount period, you revert to the full SVR. The risk is the same as staying on SVR - you are exposed to any SVR movements, and the lender can raise the SVR independently of the base rate.
Frequently Asked Questions
A Standard Variable Rate is the default interest rate set by a mortgage lender. It is the rate you revert to when an initial deal period (such as a 2-year fix or tracker) ends. Lenders set their own SVRs and can change them at their discretion - they are not directly tied to the Bank of England base rate, though base rate changes often influence SVR decisions. SVRs are typically significantly higher than the best available mortgage rates, which is why most borrowers are advised to remortgage before reverting to SVR.
A discount mortgage is set at a fixed discount below the lender's SVR. For example: SVR minus 1%. If the SVR is 6%, you pay 5%. If the SVR rises to 7%, you pay 6%. Your rate can change both when the SVR changes and independently of the base rate, because the lender controls their SVR. This is less transparent than a tracker mortgage, where the reference rate is externally set.
Discount mortgages can sometimes offer lower initial rates than fixed deals. SVR mortgages (while usually expensive) carry no early repayment charges, making them suitable if you plan to sell or make large overpayments during that period. Some short-term scenarios - such as waiting a few months for a property chain to complete before remortgaging - make staying on SVR temporarily the most practical option.
There is no fixed statutory minimum, but most mortgage terms require a reasonable notice period, typically at least a month. Lenders must follow their own terms and conditions. Following an SVR increase, you should compare the new effective cost against available alternatives and remortgage if a better deal outweighs any switching costs.
Yes - this is called a product transfer. It is often a quick and straightforward process involving no formal valuation or conveyancing, as the mortgage remains with the same lender. Product transfers typically have limited product choice compared to the full market but avoid the cost and time of a full remortgage. Read our guide to product transfer vs remortgage for a full comparison.
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