Standard variable rates (SVRs) are offered by each lender, and they roughly follow the Bank of England base rate, in most cases.

SVRs could be any value from two to five (or more) percentage points above the base rate, and don’t be surprised to find significant variations between lenders.

The interest rate that you have to pay each month can vary from one month to the next, generally dependent on if the base rate moves. Be aware that SVRs don’t always change by the same amount as the base rate, and sometimes lenders will move the rate quite simply because it benefits them to do so.

A lot of the time, borrowers end up on an SVR once their introductory fixed rate mortgage has finished.

Advantages of a standard variable rate

SVRs can work out to be cheap, and if interest rates are cut then it is likely that your rate will also fall, which means you end up paying less.

Disadvantages of a standard variable rate

You are unlikely to be allowed an SVR if you are a new mortgage customer, and there is a lot of uncertainty with them; it’s not guaranteed that you will receive the full benefits of all rate changes.

Lenders may increase their rates, and you are at their mercy if they do this. Unfortunately it can also make budgeting a struggle, because you may end up facing higher costs than you had anticipated as a result of rate hikes.