Variable Rate Mortgages Setting The Standard

Variable Rate Mortgages – Setting the​ Standard
Here’s the​ first mortgage term you​ should learn – Standard Variable Rate,​ or​ SVR .​
This is​ the​ interest rate you​ will be paying on​ the​ total amount you​ are borrowing .​
It is​ usually expressed as​ a​ percentage,​ and is​ different from an​ APR (Annual Percentage Rate) .​
An APR includes all costs associated with the​ loan,​ such as​ interest,​ fees,​ any compulsory insurances etc.
While interest rates can vary quite widely across the​ board,​ all lenders will have a​ Standard Variable Rate .​
It’s the​ default rate for their mortgages,​ and can provide a​ good indication of​ whether they are offering good deals .​
Comparing different lenders’ SVRs is​ one way to​ get an​ idea of​ who has lower rates generally – though there will be exceptions to​ this rule.
This rate fluctuates,​ going up or​ down according to​ the​ economy and the​ lender .​
The biggest factor that effects SVRs is​ the​ Base Rate set by the​ Bank of​ England .​
In recent years this has been kept relatively low,​ and mortgage interest rates have been particularly good for borrowers .​
However,​ this could change and you​ should bear in​ mind that rates could go up in​ the​ future.
Many mortgages start off with special introductory rates,​ and then revert to​ the​ SVR after a​ set period .​
These include capped and collared mortgages .​
There are also ‘fixed rate’ and ‘interest only’ mortgages available,​ which are covered in​ more detail further on​ in​ the​ guide .​
When considering mortgages with special introductory rates,​ you​ should also take into account what the​ SVR is​ likely to​ be once your initial period is​ over .​
Many mortgages come with the​ condition that you​ stick with the​ same one for several years,​ even after the​ special offer period is​ over .​
There will often be penalties if​ you​ want to​ change mortgage within this tied period.
Interest calculation,​ interest charging
Be aware that there is​ a​ difference between interest calculation and interest charging .​
Some mortgages calculate interest daily,​ which works out as​ fairer for the​ borrower as​ your overall balance is​ reducing every month,​ and therefore the​ interest will be reducing too (even by a​ tiny fraction,​ every little helps!) .​
Other lenders calculate interest monthly or​ annually,​ although annual calculation should be avoided if​ at​ all possible,​ as​ you​ will be paying the​ same interest for a​ whole year despite your balance having been reduced by your repayments .​
You should also ensure that your interest is​ charge in​ arrears,​ rather than in​ advance.
Variable Rate Mortgages Setting The Standard Variable Rate Mortgages Setting The Standard Reviewed by Henda Yesti on July 04, 2018 Rating: 5

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