What is a variable rate mortgage?
There are different types of variable mortgage available, including Standard Variable Rate, Discounted and Tracker.
A standard variable rate mortgage (also known as SVR) is a mortgage on the lender's default rate of interest, meaning that no deals or discounts are attached.
Most borrowers will find themselves on this type of mortgage when their fixed-rate deal or introductory period has come to an end.
It can be risky to stay on a SVR, as they can be lowered or raised at any time. The rates are based upon the Bank of England's base rate, however are actually set by the lender. Even if the base rate remains the same, SVR rates can be changed at the lender's discretion.
Discounted Rate Mortgage
A discounted mortgage offers a rate at a set percentage below the SVR. If you are offered a discounted rate of 1% and the SVR is currently 5%, you will pay 4% either for an introductory period or for the term of the mortgage.
Tracker Mortgage
A Tracker Mortgage tracks the Bank of England base rate and remains at a set margin above or below the current rate. This can be offered for a set introductory period or for the life of the mortgage.
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