The Standard Variable Rate: What is it?
Introduction to Standard Variable Rate
As a consumer, you may have heard of the term “standard variable rate”, but do you know what it means? A standard variable rate (SVR) is a type of interest rate charged by a lender on loans and mortgages, or on credit cards and other forms of credit. It is the most commonly used rate of interest, and it is subject to changes on a regular basis.
Significance of Standard Variable Rate
The standard variable rate is an important figure for borrowers to be aware of, as it will affect the total amount of interest they pay on their loan, mortgage or credit card. If the SVR rises, then the borrower will pay more in interest, and if the SVR falls, the borrower will pay less in interest. A change in the SVR rate is usually linked to wider economic conditions, such as inflation levels and the Bank of England base rate.
Changes in Standard Variable Rate
The standard variable rate can change at any time, and lenders are not required to give borrowers notice of the changes. If a lender does decide to make changes to their SVR, they must inform their customers of the new rate, and the date from which it will take effect.
Benefits of Standard Variable Rate
The main advantage of the standard variable rate is that borrowers know exactly how much they will be paying in interest each month. This makes it easier to budget, as the interest rate will remain the same each month. It also gives borrowers the flexibility to make overpayments on their loan or mortgage without incurring any additional charges.
Conclusion
The standard variable rate is an important factor for borrowers to consider when taking out a loan, mortgage or credit card. It is the rate of interest that lenders will charge, and it can change at any time. It is important for borrowers to be aware of the SVR, and to monitor it throughout the life of their loan, mortgage or credit card.