Standard Variable Rate, or SVR, is the first mortgage term you should know. This is how much interest you'll have to pay on the whole amount you're borrowing. It is different from an APR because it is usually given as a percentage (Annual Percentage Rate). An APR takes into account all of the costs of a loan, such as interest, fees, required insurance, etc.
Interest rates can vary a lot from one lender to the next, but all of them have a Standard Variable Rate. It is the rate at which their mortgages go into default, and it can be a good way to tell if they are giving good deals. Comparing the SVRs of different lenders is one way to figure out who, on average, has lower rates, though there will be exceptions to this rule.
This rate changes based on the economy and the lender. It can go up or down. The Base Rate, which is set by the Bank of England, is the most important thing that affects SVRs. In the past few years, this has been kept at a low level, and mortgage interest rates have been especially good for people who want to borrow money. This could change, though, and you should remember that rates could go up in the future.
Many mortgages start with special introductory rates that change to the standard variable rate (SVR) after a certain amount of time. Some of these mortgages are capped and collared. There are also "fixed rate" mortgages and "interest only" mortgages, which are explained in more detail later in this guide. When looking at mortgages with special introductory rates, you should also think about what the SVR will be after the introductory period. Many mortgages require you to stay with the same one for a few years, even after the special offer period is over. If you want to switch mortgages during this tied period, you may have to pay fees.
Interest charges, interest calculations
Know that there is a difference between figuring out interest and charging interest. Some mortgages calculate interest every day, which is better for the borrower because your overall balance goes down every month, so the interest goes down too (even if it's just a tiny bit, every bit helps!). Other lenders may calculate interest monthly or annually, but you should try to avoid annual calculations if you can, since you'll pay the same interest for a whole year even though your balance will have gone down because of your payments. You should also make sure that your interest is added after the fact, not before.
