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Variable Rate Mortgages

With a variable rate mortgage, the interest rate you pay can vary, moving up and down over time.

Every mortgage lender has a Standard Variable Rate (SVR) that is loosely based on the Bank Rate; the benchmark interest rate set by the Bank of England.

Each lender sets its own SVR, usually 1% to 2% above the Bank Rate. So where the Bank rate is 5.25%, a lender's standard variable rate may be 6.25%, 7.25% - or higher in some cases.

Learn more about Standard Variable Rate Mortgages (SVRs)

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Pros and Cons of Variable Rate Mortgages


A lender's SVR is hardly ever the most competitive interest rate it has to offer. So there is little benefit to paying the SVR itself.

Cash-Back Mortgages


Some do offer cash-back mortgages, where you pay the SVR and are handed a cash lump sum on completion of the mortgage. Cash-back mortgages can be useful for those people who need cash upfront, but are rarely competitive over the longer term.

Discounted Variable Rate Mortgages


Almost all mortgage lenders offer discounts off their SVR, which can be attractive.

A discounted variable rate mortgage works in a similar way to a tracker mortgage, but with a tracker the rate you pay is linked directly to the Bank Rate, rather than the lender's chosen standard variable rate.

Get off the SVR


Whenever you take out a mortgage, it is important that you get the best deal possible, whether that is a discounted variable rate mortgage, fixed, capped or tracker deal. When you get to the end of a mortgage deal, you must arrange to transfer to another deal. If you do not, you will automatically be transferred to the lender's SVR.

Your lender will inform you three months before you come to then end of your deal, giving you plenty of time to shop around for another. This is known as remortgaging.

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With over 21 years of industry expertise, you can trust Your Mortgage to bring you breaking industry news, as well as expert tips and advice on every aspect of mortgages in the UK.
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