Time to fix that Variable

Variable mortgages are amongst the most popular mortgages on the market, because of their comparative simplicity and easiness for most consumers to understand. The principles of variables are relatively basic: each lender sets his own Standard Variable Rate (SVR). Whilst these are in line with the base rate set by the Bank of England, they are not the exactly same as that base rate. This is where the lenders of variables make their money: by shadowing the Bank of England’s base rate, they can increase their SVRs if the base rate increases. However, if the base rate drops, they can mirror that drop but without plummeting so far as to jeopardise their profitability.

Whilst they are a relatively simple concept to understand, consumers with variable mortgages are more than likely paying interest rates that could be streamlined by seeking another lender. In addition, consumers who use variables are not guaranteed to reap the benefits that rate changes can offer, such as cheaper repayment bills.

For those looking to reduce their outgoings, there has never been a better time to shop around. With lenders mindful of taking on too much debt, some are actively encouraging borrowers to look elsewhere by offering incentives such as the waiving of redemption charges or even by offering to pay off a portion of the original loan. Whilst variables are easier to comprehend than other mortgages, the fact that they do not have to adhere entirely to the base rate might incline consumers to shop around. Which isn’t to say that variables are a bad idea; it may simply be that there is another lender who offers a better SVR than your current one.