Basically, you usually switch to a standard variable rate after the end of your fixed rate mortgage term.

The rate – and therefore your mortgage payments – can increase or decrease at any time.

What you need to know

Most people entering into new mortgage deals will choose to lock in the rate for two years, five years or more to guarantee a good deal, or to have the peace of mind knowing that the payment won’t suddenly change from month to month. the other.

But when this fixed term expires, most lenders automatically place borrowers on a standard variable rate (SVR) until a new deal is agreed.

Unlike a mortgage tracker, the SVR is not directly linked to the Bank of England’s base rate, meaning that although it may be influenced by it, it will not necessarily change with it .

The problem with an SVR is that it is generally more expensive than being on a patch.

According to the latest data from Moneyfacts, the average rate for two-year fixed-rate mortgages stood at 5.39% as of November 1, while it was 5.09% for five-year contracts. Meanwhile, the average SVR was 7.95%.

Are there any benefits?

One of the main advantages of a standard variable rate is that you can overpay for your mortgage or move to a fixed deal, with no fees or charges.

The mortgage may also come with lower processing fees than a fixed rate or tracker transaction.

And if you’re not too worried about potential fluctuations, not being on a solution means payments could fall if the lender lowers the SVR.

How to avoid an SVR mortgage

If your original mortgage term is coming to an end and you don’t want to move to the standard variable rate, your best option is to remortgage with your current lender or another lender to get a better deal.

This could secure you a lower interest rate – but remortgaging could result in new fees and charges, so consider whether it will definitely save you money in the long run.

Learn more in our Basically series…