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Five questions to ask about: Standard variable rates

What is a standard variable rate?

The standard variable rate, or SVR as it's more commonly known, is the main mortgage rate charged by a lender. This is the long-term rate of interest that borrowers will be charged once their fixed or introductory discounted or tracker period ends.

What is the average SVR?

The average SVR is 4.69 per cent but there is a wide variation in rates. Lloyds TSB and Cheltenham & Gloucester (both part of the same group) have the lowest SVR at 2.5 per cent, while the highest is Chesham Building Society's at 6.45 per cent.

Can my lender increase the SVR?

SVRs are not directly linked to the Bank of England base rate (unlike trackers) so changes are at the lender's discretion. That said, traditionally they've tended to move following changes to the base rate and some lenders guarantee that their SVR will never be more than a certain margin above base rate.

However, when the base rate plummeted from 5 per cent to 0.5 per cent between October 2008 and March last year, Lloyds TSB was the only one of the 20 largest lenders to pass on the full 4.5 per cent reduction to its SVR. And a number of providers have increased their rates over the last 11 months, even though base rate has remained unchanged.

Can my lender make me move off its SVR?

In theory, no, unless you break the terms and conditions of your mortgage agreement. However some lenders are using clauses buried in the small print to change the SVR rules even for existing borrowers part-way through their mortgage term.

Will my lender notify me if I would be better off switching to another of its mortgage deals?

Your lender will contact you if the SVR changes but it is not obliged to tell you that you could save money by switching to another product. However, most people paying the SVR will not be tied to it and therefore won't be penalised if they remortgage on to another deal. If you are one of these, it's well worth looking to see if there is a more competitive deal available.