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Friday 21st of August 2009
August 18, 2009

SVRs preferred in low-rate climate


by David Masters
SVRs preferred in low-rate climate

Homeowners increasingly prefer to stick with a standard variable rate (SVR) mortgage rather than taking out a fixed-rate deal.

Research by Unbiased.co.uk found 27% of homeowners are now on an SVR mortgage, compared with 23% earlier this year.

A quarter of those on an SVR mortgage said they have no immediate plans to switch to a fixed-rate deal.

“While in the past it could be financially crippling to remain on your lender’s standard variable rate after your mortgage deal had ended, now it is becoming a more popular option,” said David Elms, Unbiased.co.uk chief executive.

Best buy SVR rates are currently lower than the best available fixed-rate mortgages, making it a more attractive option to stick with a lender’s SVR for the moment.

However, Elms warned that once the Bank of England’s base rate starts to increase, the attractive offers currently available on fixed-rate deals will begin to dry up.

“Fixed rate deals will sharply increase should the base rate go up and borrowers may find competitive fixed rate deals hard to come by,” Elms said.

“Those remaining on SVRs need to stay alert and once the base rate starts to rise again and the market improves, ensure they act fast to secure a new deal which they can rely on not to suddenly rocket in monthly payments.”

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