Standard variable rates more popular

January 16, 2009 by Brendan

Advice & Tips

News

Now that the Bank of England’s base interest rate has plummeted so much, it seems this is leading to a huge increase in the number of people content to stay on their mortgage lender’s standard variable rate (SVR) when their special deal comes to an end.

In recent years, fixed rate and discount deals have been more popular than variable rates and at the end of one deal people have rushed to remortgage in order to avoid being on the notoriously high SVR from their lender.

However, many people are finding that now the base rate has dropped so much, when their deal comes to an end, their monthly mortgage payments are lower so they are not feeling as much pressure to remortgage, which isn’t great news for mortgage advisors who normally rely on remortgages as good income particularly when property sales have slowed, such as now.

All the signs are there though that the mortgage market may be starting to make a recovery. This is partially because mortgage lenders are slowly starting to relax a little and begin to lend to each other again. From a few months ago when the smallest deposit you could put down was 20 per cent, we have now started to see again 90 per cent mortgages and even two 95 per cent mortgages appeared on the market recently, as mentioned in yesterday’s article.

Mortgage lenders do not always like borrowers to be on their SVR as it means they aren’t tied in, leaving the lender open to borrowers leaving at little notice so this is a good sign overall.