The Standard Variable Rate quoted by a lender is the interest rate that a lender chooses to apply to mortgages, typically when a customer’s fixed rate or tracker rate ends. Unlike a tracker mortgage, the Bank may choose not to follow the specific indices linked to the tracker mortgage (usually the Bank of England’s Base Rate) when adjusting their Standard Variable rate.

Therefore, the Bank of England Base Rate might rise by 0.5% but unlike in the case of a Tracker Mortgage, the lender may choose not to adjust its standard variable rate, or delay such an increase. It could even reduce its rate, although this would be unlikely in such circumstances.

In most scenarios it is reasonable to assume that the bank’s Standard Variable Rate will rise and fall roughly in line with increases and decreases in the Bank of England’s Base rate over the medium term, but there may be a time lag or the bank may choose to adjust its rate independently.

Unlike a tracker, there is no guarantee as to what the rate will do when the Bank of England changes its Base Lending Rate but, in most cases, mortgages that revert to a standard variable rate are unlikely to have very large penalty clauses for early repayment, meaning that most of us can remortgage without too much expense were a lender were to unilaterally raise its standard variable rate above the market.

It is therefore critical that you establish all the terms of a mortgage when considering your options. Contact us or call 01628 507477 for more information.

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