What is the difference between a standard variable rate and a fixed-rate mortgage?

Full answer

A fixed-rate mortgage fixes your interest rate for an agreed period -- commonly 2, 3 or 5 years. During that window your monthly repayment is certain regardless of what the Bank of England base rate does, which makes budgeting predictable. The trade-off is that fixed deals usually carry early repayment charges (ERCs) if you overpay beyond the allowance or leave before the term ends. A standard variable rate (SVR) is the rate your mortgage reverts to once an introductory deal expires. Each lender sets its own SVR and can change it whenever it chooses; it is not directly tied to the base rate, though it tends to move with it. SVRs are typically among the most expensive options, so borrowers who do nothing at the end of a fix often see payments jump sharply. Who this affects: anyone whose fixed or tracker deal is ending should compare remortgage options well before the reversion date, because rolling onto the SVR is rarely the cheapest outcome. SVRs do offer flexibility -- usually no ERCs, so you can overpay or switch freely -- which can suit borrowers planning to repay or move soon. Worked example (illustrative): on a GBP 200,000 balance, a one-percentage-point difference in rate is roughly GBP 2,000 of interest a year, so the gap between an SVR and a competitive fix can be substantial. Run your own balance, rate and term through the mortgage calculator to see the monthly difference for your situation. 2026/27 note: mortgage rates are not set by HMRC and are not part of any tax rate card, so always check live lender rates and the current Bank of England base rate before deciding. Consider how long you want payment certainty, whether you may move or overpay, and the size of any ERC when weighing a fix against staying on the SVR.

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