Less than standard mortgage rates

Once upon a time Standard Variable Mortgage Rates (SVRs) were just that – pretty much the same across all lenders, give or take a percent. But the current difference between the highest and lowest SVRs is nearly 4%, not insignificant given the Bank of England Base Rate remains at 0.5%.

As a reminder, the SVR is a lender’s default mortgage rate which usually applies after a fixed rate or discount has come to an end on your mortgage. In the past it’s almost always been worth shopping around for a better deal the minute a SVR kicks in.

While that remains the case for many, in the current climate it’s not quite as straightforward. Some SVRs are very competitive, while others are shockingly high. And a few lenders have been increasing their SVRs despite Base Rate being stuck at 0.5% since March 2009.

If you have a mortgage and you’re paying the SVR then check the rate with your lender (it should be on their website). The table below shows some of the highest and lowest SVRs.

Lowest SVRs Highest SVRs
Lender SVR Lender SVR
Cheltenham & Gloucester 2.50% Chesham BS 6.45%
Cheshire BS 2.50% Nottingham BS 5.99%
Derbyshire BS 2.50% Accord 5.99%
Lloyds TSB 2.50% Newcastle BS 5.99%
Nationwide BS* 2.50%* Stroud & Swindon BS 5.99%

Source: Moneyfacts 6/01/10. * Note: only applies to mortgages taken out on or before 29/4/09

If you’re fortunate enough to be on a 2.5% SVR then chances are you’re best off staying put, as this is very competitive versus other mortgages on the market at present. But you might find yourself paying rather more than this, for example a whopping 6.45% if your mortgage is with Chesham Building society.

Don’t underestimate how much extra an over the top rate could cost you. On a £100,000 repayment mortgage over 10 years interest would total £13,124 at 2.5% soaring to £35,952 at 6.45% - over £20,000 difference!

If you’re on an uncompetitive SVR and your mortgage is 30-40% less than the value of your home then you should be able to re-mortgage at a more attractive rate, potentially saving you a small fortune. Of course, you need to factor in any costs of moving such as any exit penalties on your existing mortgage and fees on the new one, as well as valuation and legal costs. You can then work out how long it’ll take you to break even and decide whether switching mortgage is worthwhile.

A quick trawl on the Internet, including price comparison sites like www.moneyfacts.co.uk and moneysupermarket.co.uk, should reveal the current ‘best buys’. And if doing it yourself seems like too much work, then use a fee-free independent mortgage broker. You’ll rarely pay any more than by going direct; the broker will usually receive around 0.35% of the mortgage value as a fee from the lender to pay for their time.