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Standard Variable Rate Mortgage

The Standard Variable Rate implies the base rate of interest fixed by the Bank of England. These rates keep fluctuating throughout the year.

However what we understand by a Standard Variable Rate mortgage is that the banker will charge a fixed premium over the base rate. For example, the base rate or the standard variable rate currently is 6% per annum. The banker charges a premium of 1% over the base rate and hence the interest rate payable as per the terms would be 7% per annum. As the Standard Variable Rates fluctuate, so will the payable interest rate. If the base rate increases to 6.5% per annum, the payable interest rate would be 7.5% per annum.

The mortgage terms default to this mortgage type whenever the capped, fixed or discount mortgage period come to an end. So let us move on to the pros and corns of a Standard Variable Rate Mortgage.

The key disadvantage being that it is difficult to predict the future. When one chooses to opt for this Mortgage type, he’s surely expecting the interest rate to fall in the future. However it is complicated to figure out what stand the Bank of England takes on the base rates. Hey, but surely if it is to your good luck that the interest rates have taken a downturn then you have won the race.

When you are predicting future rates take into account factors such as the economies state and future prospects. Even after taking into account all factors there is a risk that the interest rates will raise in the future.