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Variable rate essentially means that the rate can move up and down at any time, for any reason.

This type of mortgage comes in three categories: Tracker Rate, Standard Variable Rate (SVR) and Discount Rate.  

Standard Variable Rate Mortgages

When your agreed period comes to end on either a fixed, discount or tracker rate you will typically be transferred to the lender’s SVR.

Lenders can choose to change their SVR at any point to any percentage. If you do not have financial security and are relying on your lender’s SVR to stay low, it is worth considering re-mortgaging to something more reliable.

Advantages of a variable rate mortgage

  • If interest rates fall, so will your monthly payments
  • Some products allow full repayment without having to pay early repayment charges
  • The Bank of England Base Rate is still at its historic low of 0.5%, meaning many SVR’s are also low

Disadvantages of a variable rate mortgage

  • If interest rates rise, so will your monthly payments
  • You are offered no financial security as interest rates can rise at any time

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