Standard Variable Rate Mortgages

In recent times it has always been to the client’s advantage to look around the market to see what other products are available if they moved providers. In the current fragile financial markets it is very often worthwhile staying  put with your existing lender and to  transfer to a standard variable rate which is proving to be  more attractive. than to pay a very high fee to your existing lender to switch to a different plan.

Clients of course have the option of switching to a new provider but there are always fees which have to be taken in account the largest of which is normally the lenders arrangement fee. When you compare the Standard variable rate with an alternative product we are finding that in the current financial market, August 2017, the cost to the lender of bringing new funds is much higher than they would normally expect to have to pay, and this cost is of course being passed onto the client with the result that the lenders fee underpins the headline rate. When the cost of the fee is added to the loan and is averaged out over the term of the plan,( normally 2/3 years ) although the SVR rate may appear to be more expensive the standard variable plan rate often becomes more attractive..

The standard variable rate also has the advantage that it does not normally attract an early redemption penalty which would allow the client to take advantage of any changes in the money markets in the future, to switch to another product or provider without the sting in the tail of an exit penalty..

We must see a return to positive growth in the property market to give lenders the opportunity to bring more attractive plans linked to the increased equity in property each month which then has the knock on effect of lowering the lenders exposure to risk.

In this market lenders are very much risk averse so high loan to value mortgages are not a priority, link this with the cost of funding in the money markets, the standard variable rate mortgage does have its advantages.