Standard Variable Rate
This is the most popular type of mortgage. The rate of interest charged varies throughout the lifetime of the loan. Lenders review and set their own rates periodically, taking into account such factors as:
- Competitors' rates.
- Base rate as set by the Monetary Policy Committee (MPC) of the Bank of England. Some lenders do not follow exactly the bank base rate changes announced by the MPC. If the income flow from savers is favourable, they may be able to hold off for a few weeks, or even months, and even then not pass the full increase on to borrowers.
- Changes in rates they themselves are charged for raising lending finance.
Some lenders set their interest rates with reference to the amount borrowed. Most calculate the interest owed once a year and divide that into equal monthly amounts.
Standard variable rate can therefore be regarded as the standard type of mortgage and all other products as a variation of it. As interest rates fluctuate according to market forces, they are unpredictable and some people prefer a less volatile type of product even if this means that they end up paying a little more in the long-term for the security of being certain of the level of their repayments (at least for a period). For this reason, many borrowers now choose fixed or capped rate mortgages.
Your home may be repossessed if you do not keep up repayments on your mortgage.
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