The Big Difference in Standard Variable Rates

Before the recession hit, standard variable rates were fairly standard across the market.  The UK was a competitive mortgage market and you could figure that true cost of standard variable ratemost standard vairable rates were around 2-2.5% above the bank base rate. 

That was then, but now is a very different story.  The difference between the best standard variable rate and the worst is nearly 4% according to moneyfacts.  The best standard variable rate was found to be Cheltenham & Gloucester and Nationwide at 2.5% whereas Chesham Building Society had the worst standard vairable rate at 6.45%.

What money facts found in terms of true mortgage cost between these two standard variable rates was startling.  On a mortgage of £150000 the Chesham mortgage would cost the borrower £5925 MORE than the equivalent mortgage with the Nationwide. There has always been a case to suggest that when you are on the standard variable rate you probably have no redemption penalties and as such you should be shopping for a better rate but clearly anyone who is on the Chesham standard variable rate can easily do better.  Many borrowers are currently staying on standard variable rates because their rate is so good as in the case of Nationwide and Cheltenham & Gloucester, or because they are waiting to see what happens to the market and what to do next.

Sadly some customers are being forced to pay higher standard variable rates because they do not have enough equity in their homes to find a better rate.  The fact is that the standard variable rate has never been so disjointed from the market.  As Bank of Egland base rates were droppped some lenders passed on these cuts whereas others didn't.  When interest rates do eventually start creeping up it will be interesting to see how those lenders with the higher SVRs react.

Some other current standard variable rates. 



Cheltenham & Gloucester
Nationwide BS
first direct
Royal Bank of Scotland
Britannia BS
Coventry BS
Northern Rock
Bank of Scotland
Chelsea BS
Chesham BS

Source: Moneyfacts, January 2010

Are Fixed Rates A Good Option Now?

There are plenty of people who are very happy with their low standard variable rate mortgages right now but these rates won’t remain low forever.  As I write this the Bank Of England is currently at 1%.  The rate could go down further but obviously not by much. 

So the question remains, fix now or later?  Who knows on this one.  Some lenders have been putting fixed rates up recently even though base rates are going down.  Does this mean that any new fixes coming on to the market will be higher?

No one has a crystal ball right now so it is difficult to tell.  Personal finances come down to personal choice.  If you are worried about rates going up you might fix now otherwise stay on the variable rate and take your chances in the near future.  One thing is for certain, standard variable rates will go up again one day soon so don’t get used to them now and think that these rates are ‘normal.’