Differences between Halifax Standard Variable Rate and Homeowner Variable Rate

BA_Baracus

Good afternoon all

Like a lot of other borrowers my Halifax 2 year fixed rate mortgage will be coming to an end and reverting to the Standard Variable Rate (SVR).

I see that Halifax introduced the Homeowner Variable Rate (HVR) for mortgage applications from 4 January 2011.

Lucky for me I applied before this date so will go onto the SVR rather than the HVR.

Both rates are currently 3.99% so I thought what is the big deal??? Well my research suggests that it is more than just a name change.

Can someone please confirm my understanding of the HVR and the differences between it and the SVR are as follows:

1. HVR will be set at whatever rate the Halifax feels like
2. The SVR is still loosely linked to the Bank of England base rate so provides some level of assurance
3. The SVR has a cap so will not go above a certain level (but I notice that Halifax can change the cap if they want)

My current fixed rate is 3.99% and I would be quite happy going onto the SVR at 3.99% if I am getting advantages over the HVR.

Or should I just accept that Halifax does what it wants to and choose another fix and accept that I will go onto the HVR after that.

If the BoE base rate stays low for another few years then sticking with the SVR might be the best option. Whereas international funding for the HVR may push that rate up even higher.

Has anyone else considered this situation and the advantages/disadvantages.

Many thanks in advance for responses.

PS Not looking for any predictions what may/may not happen to markets in the future.

opinions4u

I think the reality is that they will do what they want with both rates to reflect market conditions at the time.

I'd fully expect them to keep the two rates identical.

Remember, with the link to BofE rate they can give notice to vary the margin anyway.

Jimbo1976

It is hard to see what the value is in having 2 different SVR rates but both at the same level. At least with Nationwide you can see why it launched a new one as its BMR is linked to the base rate so the new SMR can be increased if funding gets more expensive.

For a long time SVRs were closely correlated to (but not directly linked) to the base rate. However during the financial crisis that link has broken. The base rate has remained unchanged at 0.5% but lenders funding costs have increased sharply, especially since the Euro crisis got worse last summer.

I suspect as you have suggested that the SVR will stay closer to the base rate compared with the HVR but thats just guesswork at best. If you feel comfortable knowing your rate will go up, then stay on SVR, if that causes you sleepless nights then you can change to a fixed rate. Give Halifax a call and ask what fixed rates you can have. These will vary compared with the size of your loan and your mortgage (loan to value). It will use its own house price index to work out the value of your home relative to when you bought it