Should I care at all about the revert rate when choosing a fixed rate mortgage?

know_nothing_2

Hey guys,

Hoping you can help! I'm researching the best 5 year fixed rate at 80% LTV and weighing up the pros/cons of the various available deals.

When searching on Money Supermarket they report a 'revert rate' for each mortgage, ie the interest rate we'll be paying after the fixed period ends. My question is: should I factor this into my decision making at all? Some of them are way better than others but lenders can change their SVR whenever they want, right? I suppose what I'm asking is:

If a lender has a low SVR now, is that any indicator that they will (relatively speaking) in the future?

Cheers,
Chris

dano17439

If you're going to remortgage after the 5 years is up then I wouldn't bother paying any attention to the SVR.

However how do you know if you will be in position to remortgage? Nobody knows whats round the corner. so if you are to errr on the side of caution then probably is worth taking notice

ACG

The SVR is usually linked to another rate (bank of england base or libor) so its not usually a case of lender being able to increase whenever they like to whatever they like.

SVR is important as changes in your circumstances can effect your future options. As an example, my firend has a mortgage we did 2 years ago. It is just coming up to the end of the deal, since we did the mortgage she has left her job had a baby and now only works 2 days a week. So she can not switch lenders, her options are to sit on the SVR or switch to a retention product if the lender has any. Its a lender who does have good deals so its not to bad but had that not been the case she could be stuck on the SVR.

Personally I treat it as more of an afterthought, in that its important but probably not enough to prevent me going with the cheapest or unless there is not much in it.

know_nothing_2

Cheers guys! I think I'm being thrown by things like First Direct (for example) having an SVR that's way lower than most other people's (at 3.69%) but accompanying it with the statement:

The Standard Variable Rate will vary over the term of the loan and is a variable rate set internally by first direct. The Standard Variable Rate does not track the Bank of England Base Rate.

Which seems to imply that if they decide it'll be 20% in the future, that's up to them! Totally get what you guys are saying though, and we more than likely will remortgage at the end of the fixed period, so it's probably no biggie.

getmore4less

Look at the history of the lender, typicaly they stay in character so relatively if they have been consistantly lower then they probably will stay that way.

if not you have nothing to lose as the alternative lender would have probably been higher anyway.


What is just as important is the retention deal hisory and the fees as these are what eat into any savings quite quickly.

Don't rule out trackers if you don't need to fix.

submarine76

I would take it into consideration. I was on a 5 year fixed with Woolwich, when it ended it put me on a tracker rate of BBBR+1.49%. When it came to an end I was looking at a remortgage until I realized I was on a pretty good rate just out of good fortune so I just stayed put and avoided any more product fees. I have a lot more spare every month than I did when I took the mortgage out so I will just stay put as it gives me the flexibility to overpay when I can without penalties and no exit fee.