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Standard Variable Rate...

Standard variable rate or SVR is a term given to the rate that lenders base all their products on.

This rate is not a rate that the lender offers to new customers however it is the rate that existing customers who are not still on a scheme will be charged.

Please note the graph below is not accurate and is for illustrative purposes only.

When lenders offer discounts the rate that they offer is normally calculated from their standard variable rate. You will find with most mortgage companies their standard variable rate is an amount over Bank Base Rate maybe 1% or 2%.

It is also at this rate that lenders can make the most profit and the longer they can keep existing customers on this rate the better. For this reason there is a flourishing re-mortgage market.

When you borrow money from a mortgage lender they invariably offer you some kind of incentive to join them. However the catch to this incentive is they generally apply a penalty if you move your mortgage from them within a given period of time.

That said once that period of time has elapsed then it is fair for you to look back onto the market to see if there is another lender out there who is will to offer you another incentive for your business.

With that in mind as soon as any mortgage customer has a deal that ends and they revert to the standard variable rate with their lender, if they are not in a period of early repayment charges, they should always consider looking at the benefits of re-mortgaging.

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