What is an SVR?

staceeas87

What is an SVR - I asked the same question:-

An SVR is the default rate that most mortgages switch to once an initial fix or tracker deal period ends, and unless there is a cast-iron clause preventing it, lenders are free to raise them at any time - independent of the Bank of England base rate... I believe something to be VERY AWARE OF!

blitzboy

staceeas87 wrote: »

What is an SVR - I asked the same question:-

An SVR is the default rate that most mortgages switch to once an initial fix or tracker deal period ends, and unless there is a cast-iron clause preventing it, lenders are free to raise them at any time - independent of the Bank of England base rate... I believe something to be VERY AWARE OF!

Well....Yeah :question: :huh:

holly_hobby

SVR = standard variable rate
BMR = base mortgage rate

Neither of which are directly linked to BOE base UNLESS the lender elects the association, and discloses in their T&Cs the format it will take ( i.e our BMR will reflect BOE base & 2% (or whatever they choose).

Whichever variable base the lender uses as their mge variable rate, it may be applied to the mge from inception as the borrowers preferred choice, post cessation of any product deal (which is not isolated to only fixed or tracker products) OR by the lender, if the mortgagor breaches the contractual terms of the mge (ie letting for commercial purposes, without consent)

Mge lenders have ALWAYS since the yr dot had an SVR rate (BMR being a laterly introducted variation) as their own independently set "revert to" (or base rate) - its not exactly breaking news, but the OPs post (which just needed a little clarification) may be a worthy post for those readers who have little or no mortgage or financial experience.

Holly

Joe_Bloggs

Some lenders have chosen to later enforce an exceptional circumstances clause in a mortgage contract. This makes SVR whatever they say it is regardless of whatever they said it would be based upon.

An SVR/BMR is what you are stuck with if you are deemed unattractive /can't remortgage to another lender. Think ahead and don't get sucked in to a deal you can't escape.

J_B.

betmunch

staceeas87 wrote: »

What is an SVR - I asked the same question:-

An SVR is the default rate that most mortgages switch to once an initial fix or tracker deal period ends, and unless there is a cast-iron clause preventing it, lenders are free to raise them at any time - independent of the Bank of England base rate... I believe something to be VERY AWARE OF!

So when taking a 2 year fix on a 25 year mortgage you think its important to be aware of the rate you will be paying AFTER the 2 year deal ends?

My friend you should work in my game, forward thinking like that could be a massive asset.

Next you will be suggesting that people with Interest Only mortgages should make some kind of provision for paying the lump sum back at the end of the term!

:rotfl:

Wutang_2

Staceeas is just copying and pasting stuff - this is from http://www.thisismoney.co.uk/money/mortgageshome/article-1687576/What-mortgage-rates.html

holly_hobby

Joe_Bloggs wrote: »

Some lenders have chosen to later enforce an exceptional circumstances clause in a mortgage contract. This makes SVR whatever they say it is regardless of whatever they said it would be based upon.

An SVR/BMR is what you are stuck with if you are deemed unattractive /can't remortgage to another lender. Think ahead and don't get sucked in to a deal you can't escape.

J_B.

They can levy SVR/BMR at whatever rate they deem to be reasonable - this has always been the case.

The "exceptional circumstances" clause comes into effect where the terms of the contractual agreement are being amended in line with business requirements (i.e often seen where 2 or more providers have merged(been the subject of a takeover etc), with the host lender applying their own variable rate terms(post product), to those mortgagors they have inherited as part of the merger/take over/buy out or whatever).

Betmutch is absoutely right, the proficient mortgage advisor or savvy layman, not only looks and selects a mge lender on the headline mge product, but also considers where their SVR/BMR sits alongside other compariable lenders (togther with overall fees inc MEAFs) as this gives a true cost comparision over the longerm ....

i.e - no point in having a 1% fixed for a yr, when the lenders SVR/BMR is 5 points above everyone elses, as it must be considered as part of the advice process that the possability of a remortgage post cessation of the deal, may not an option/available for several reasons .... leaving the mortgagor the possability of being quite royally screwed for the forseeable (i.e until they can secure a change of lender due to a change in status/LTV or both !).

With very soon the savings made via the initial product, being obliterated by the top heavy rate (&/or fees) now being suffered. (indeed when I arranged mges as a Mge & FA, a million+ yrs ago, this factor was always considered as part of the decision making process .... those or wanted the lowest rates regardless of where the lender sat re subsequent SVRs in the market, would be fully documented (even though mge advice wasn't regulated, way by then in the stone age !)

Hope this helps

Holly

pinkteapot

Agree with the sentiments of others but we have seen an alarming number of people coming on here in recent years saying that their mortgage is "ending" and worried they can't get another one. There seems to be a growing perception that a mortgage is only for the 2/3/5 years of the initial offer, rather than 25 years with a price that changes a few years in. Not overly surprised we've ended up with a post like this.

Joe_Bloggs

holly hobby stated :-

The "exceptional circumstances" clause comes into effect where the terms of the contractual agreement are being amended in line with business requirements

It is now a moot point as no single borrower can afford to take their lender to court. Perhaps there was a role for competent OFT involvement on behalf of the consumer.

Perhaps the 'business requirement' should be more prevalent in all contracts or should it just be buried within mortgage contracts ?

J_B.

betmunch

pinkteapot wrote: »

Agree with the sentiments of others but we have seen an alarming number of people coming on here in recent years saying that their mortgage is "ending" and worried they can't get another one. There seems to be a growing perception that a mortgage is only for the 2/3/5 years of the initial offer, rather than 25 years with a price that changes a few years in. Not overly surprised we've ended up with a post like this.

I saw a lovely couple this week that thought the same thing.

Mortgage ending in a couple of months, what do we do we cant get another one at our age.

Fixed period ends soon, they still have 15 years to go on the SVR! Think they were very happy when I told them they didnt need to worry and now have a plan to pay off the mortgage in the next 15 years

holly_hobby

Joe_Bloggs wrote: »

It is now a moot point as no single borrower can afford to take their lender to court. Perhaps there was a role for competent OFT involvement on behalf of the consumer.

Perhaps the 'business requirement' should be more prevalent in all contracts or should it just be buried within mortgage contracts ?

J_B.

There never was a beneficial judicial route for the mortgagor (even as a class action) to go down, upon the lender exercising "exceptional circumstance" under the t&cs.

As such action would only be implemented on the basis, that not to do so would have a real and severe negative effect to the business (i.e keeping it profitable), and is therefore not classed as breach of contract.

Obviously it is the mortgagors responsibility to read all the contractual T&Cs before they sign to agree to them. If the provision of how the lender may revise the basis upon which they determine SVR/BMR is published, and the mortgagor does not wish to be exposed to any such changes, then simple find another lender ..... the reality I suspect is that all lenders will have this clause detailed (which isn't a new thing TBH).

Holly