For many households, mortgages are one of the most significant monthly expenses. So, we know the importance of keeping informed about what your monthly mortgage payment will be, particularly if you have a Standard Variable Rate (SVR) mortgage which can change as the market changes. Here’s a quick rundown on why the SVR has been changing over the past 12 months and how this can have an impact on your mortgage payments.
The Standard Variable Rate is a rate of interest set by your mortgage lender. As it’s not a fixed rate, it can fluctuate over time as is influenced by a number of different factors.
The SVR is not tied to the Bank of England base rate. So, although the base rate can influence SVR mortgage rates and other UK rates such as loan and savings accounts, it isn’t guaranteed that when the base rate changes that SVR will change by the same amount. At Hodge, we’ll always act reasonably when setting the Standard Variable Rate.
Due to high inflation, the Bank of England has raised the base rate nine times in the past year, and it’s been rising slowly since the onset of the Covid-19 pandemic in 2020. An overall percentage point change of 3.75 since March 2022 and 4.40% since March 2020. In line with these rising interest rates, we’ve also made the considered decision to rise our Standard Variable Rate for mortgages six times in 12 months. To support customers, we’ve looked at minimal SVR increases. Since April 2022 we’ve increased our SVR by 3.25 percentage points, lower than the Bank of England base rate increases.
Mortgage lenders may decrease their Standard Variable Rate at any time, not only when the Bank of England changes the base rate. If you’re on a current fixed, tracker or discounted mortgage you’ll usually be moved on to the SVR once your existing mortgage deal ends, unless you choose to switch to a new deal.
Your mortgage payments will increase or decrease depending if you're on an SVR mortgage and if the SVR changes. This will change the amount which is taken from your bank account.
Customers who pay by Direct Debit, there’s no need to do anything as we will make the adjustments. Customers who pay by standing order will need to update the payment amount to reflect the change. If they increase and you don’t increase your standing order, it could result in a shortfall and potential arrears. Similarly, if payments are due to decrease you may overpay on you mortgage. We’ll always give you ten days written notice before Direct Debit or Standing Order payments are taken.
Remortgaging is a big decision, so it’s best you speak to an independent adviser first to make sure you’re moving to the right deal for you. Or you can you can start your search for an adviser using unbiased.co.uk. If you do go ahead with their advice, then we’ll pay the adviser a fee called a procuration fee for assisting you with the rate switch.
For customers on a Standard Variable Rate, you’ll stay on this rate as long as your mortgage lasts or until you take out another mortgage deal. SVR mortgages are usually quite flexible so you can leave the mortgage at any time and may not have to pay an Early Repayment Charges if you repay or remortgage. If you’re on a SVR and would like to refix your interest rate, you can, subject to a minimum of two years remaining on your mortgage term if applicable.
If you’re struggling to meet mortgage payments, please contact us and we will do our best to provide helpful information and options that may be available to you. Alternatively, you can visit the Hodge, Dealing with difficult times hub.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
For more information please email us at firstname.lastname@example.org or call us on 0800 731 4076.
This article is correct at time of publishing and for general information purposes only. We recommend you speak to a professional financial adviser for advice. You can find a financial adviser and further personal finance information at www.unbiased.co.uk.