Variable rate mortgages

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

Each lender sets its own Standard Variable Rate (SVR), usually a few percentage points above the Bank Base Rate. So where the Bank Base Rate is 0.5%, a lender's standard variable rate may be 3.5%, 4.5% - or higher in some cases.

To work out how much your monthly repayments on a SVR mortgage would be, use our calculators.

Pros and cons of variable rate mortgages

Every mortgage lender has a Standard Variable Rate (SVR) that is loosely based on the Bank Base Rate; the benchmark interest rate set by the Bank of England. A bank's variable rate or building society's SVR is usually not the most competitive interest rate it has to offer. But these days the most competitive rates tend only to be available to borrowers with a very large deposit or a lot of equity in their property. Therefore the SVR can be an attractive rate for borrowers who do not have a large deposit or lots of equity.

To receive fee-free advice on whether a variable rate mortgage would be suitable for your needs, click here.

Cashback mortgages

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


Discounted variable rate mortgages

Some 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 Base 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 should see whether you can transfer to another deal. If you do not, you will automatically be transferred to the lender's SVR. If you do not have a large amount of equity in your property, this may turn out to be the best rate available to you. 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.


Click here to compare the best variable rate mortgages


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