Lender SVR
Interested in talking to mortgage broker about lender SVRs.
- What is the range like for SVRs currently? How does it compare historically?
- Are more customers sitting on SVRs? What are there options/what advice would you give them?
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Many standard variable rates are shockingly high at the moment and they will probably get even higher. It seems like more borrowers are sticking on SVRs for longer because they hope to refinance to a cheaper rate in the near future.
If homeowners are staying with a lender on 7.5% standard variable rate for flexibility then ideally mortgage providers would offer no early repayment charge deals to existing customers, so they do not get stuck on these super-expensive rates.
Mortgage lenders have to put more cash aside because homeowners on an SVR can refinance at any time, but even so, charging such high rates is pretty shocking.
There are lots of no early repayment charge products available so there are options availbale if your lender doesn't offer more flexible mortgages.
If homeowners are staying with a lender on 7.5% standard variable rate for flexibility then ideally mortgage providers would offer no early repayment charge deals to existing customers, so they do not get stuck on these super-expensive rates.
Mortgage lenders have to put more cash aside because homeowners on an SVR can refinance at any time, but even so, charging such high rates is pretty shocking.
There are lots of no early repayment charge products available so there are options availbale if your lender doesn't offer more flexible mortgages.
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SVRs vary widely at the moment, some start with a 6, some start with an 8 and plenty in between. The lowest ones make me nervous when it comes to recommending variable deals, as they seem open to sudden huge jumps to catch up with the market (and thus suddenly increasing lender margins) - which I do of course warn clients about happening. It's tricky to predict though, if rates do start to fall as the IMF suggested, then you'd hope the high SVR lenders would start to fall first and give benefits to borrowers on variable deals.
My gut feeling is that SVR-linked variable rates are better when interest rates are on the way up because of not always being passed on (see Suffolk BS for a good example of this), and there being a lag of changes to customer rates: but trackers are more likely to be beneficial to borrowers on the way down because that's the very rule of a tracker! I'm not seeing many people sit on SVR though, most people have noticed the impact enough to take action!
My gut feeling is that SVR-linked variable rates are better when interest rates are on the way up because of not always being passed on (see Suffolk BS for a good example of this), and there being a lag of changes to customer rates: but trackers are more likely to be beneficial to borrowers on the way down because that's the very rule of a tracker! I'm not seeing many people sit on SVR though, most people have noticed the impact enough to take action!
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Having asked our systems for an average standard variable rate from the top 10 used High Street lenders in our data it came back with a rate of 7.37% - this is higher than its been in I think 2 decades now. Sadly some clients no matter how hard you try and engage them they just don't seem to listen to your cries of "we need to get you off of the lender's standard variable rate" - why this is the case is the million-dollar question. Some seem to just not have the ability to enter into the rate negotiation fuss when they aren't looking at moving home - it's crazy but this is a fact, some just can't be bothered. Our current advice is that 2 and 5-year fixed rates are higher than we would expect them to be and so we are often found in discussions with clients on taking a 2-year deal now in the hope that the market has calmed when the deal comes to an end and hopefully, we can then pick up a new longer term fixed deal in the 3% range. Sadly we have no magic wand though.