How does SVR work...

dtailor1074

Hi Guys,

I'd be grateful if someone could confirm how the standard variable rate works once the fixed rate has elapsed.

In March 2007 we started our 2 year fixed deal with Abbey, 5.19% changing to 7.34% svr after the 2 years. At the time the BOE base rate was 5.25%.
Just so I understand how this works, when we go onto the SVR next year will this be at the rate of 7.34% or will this go down to 7.09% as the BOE base has since been reduced by .25%.

Thank you in advance.
D.

EdInvestor

Check with Abbey what their SVR is now.Unlike a base rate tracker mortgage, not all banks adjust their SVR when bank base rate changes.

dtailor1074

That confirms it's not as simple as my example above, thanks for the advice Ed.

sdooley

The Standard Variable Rate of a bank is set by the bank. They often move up and down at the same time as the Bank of England base rate, but there is no obligation on banks to do that. Sometimes a 0.25% base rate cut will only be matched by a 0.15% bank cut.

With Abbey, unlike the small (e.g. sub-prime, buy-to-let) lenders, you can assume that the rates will not move massively away from 2-3% above base rate.

The other good thing about SVR is you can generally leave without penalty (though know nothing about Abbey).

Luckily, following the last recession, a case established that a bank can't have two or more standard variable rates - cheeky banks had been trying to put their 'better' customers on cheaper rates.

koexelek

EdInvestor wrote: »

Unlike a base rate tracker mortgage, not all banks adjust their SVR when bank base rate changes.

they do if it goes up:rotfl:

dtailor1074

Thanks for the reply sdooley,

I did do a quick search and it does look like their svr is now 7.09%. I'll call them later to confirm. Although this doesn't actually affect me until next year i wanted to know how it worked in principal as no doubt the svr will have changed again by then. Thanks again.

lado2uk

Hi I have a base rate tracker and I have seen my mortgagdge payment reduce over the past year, My current deal ends in August 09 and I have been told that my what my new payments will be and I am fine with it.

Just wanted to know if that amount would stay the same or goup and down on svr. Cheers