Don’t believe the tripe; What’s a standard variable rate?
Author: Andy Bedford » Publish Date: 19 June 2009
As a mortgage advisor, you often have to try and combat the expert opinion of “the bloke down the pub” and even apparently knowledgeable sources.
Whilst looking for a table of current standard variable rates recently I came across this quote on fool.co.uk:
“First of all, let’s look at Standard Variable Rate (SVR). This is the standard rate of interest that lenders use, and as it says, it is variable. This is because it is linked to the Bank of England base rate – so whenever that goes up, so will your mortgage rate and thus so will your mortgage payments.
However, SVR Mortgages aren’t just linked to the base rate, they’re usually set at around 1-2% higher. This makes this type of mortgage very expensive.”
Any mortgage broker worth his salt would cringe at the apparent advice that SVRs are linked to the Bank of England Base Rate or “BOE Base Rate”, and will move in line with it.
Any borrower whose SVR is still above 3% is probably more than aware that this is not the case.
In reality, the lender’s SVR is a rate that could move due to many things including; LIBOR, the BOE Base Rate; the need to attract savers and a myriad of other market forces.
That’s why the full extent of the cuts in the BOE Base Rate has not been passed on in full to many borrowers, as banks just need to recapitalise.
What’s the point you ask? When you’re looking to find out what to do with your mortgage, a qualified mortgage advisor has a legal duty of care to you. Something neither a website nor the bloke down the pub; will provide.