In a Standard Variable Rate (SVR) mortgage, the borrower’s monthly repayments are based on the prevailing rates of interest their lender charges — not the Bank of England (BoE) base rate. In other words, it is entirely the lender’s decision on the rate of interest they charge the borrower.

Although the rate of interest charged in an SVR mortgage can be heavily influenced by changes in the Bank of England base rate. Whenever the bank raises or lowers the base rate, the lender can do the same, or ignore the change altogether. On occasions, the lender may increase or decrease their rates of interest even if the BoE has not changed theirs. The rate of interest charged on SVR mortgages can often range from 2% - 5% above the base rate - or more.

As SVR mortgages do not involve any special financial inducements, they can be more (or less) expensive than other types of mortgages. And unlike fixed-rate mortgages where the rate of interest never changes, SVR borrowers can never be certain when their monthly repayment may change.

Generally speaking, arrangement fees for SVR mortgages tend to be lower than for trackers or fixed-rate deals and if the borrower pays off their mortgage sooner than planned, the homeowner might not incur an early repayment charge.