In a welcome move for homeowners with SVR mortgages, several leading mortgage lenders have already announced reductions in their Standard Variable Rate (SVR) mortgages following the Bank of England’s decision to lower the base rate earlier this month. Effective from the 1st of August 2024, the Bank of England reduced its base rate by 0.25%, bringing it down to 5%. This decision has prompted lenders like Coventry Building Society, Santander, Virgin Money, Clydesdale and Yorkshire Bank to adjust their SVR mortgages accordingly. I have been following the rate fluctuations and inflation trends in the UK for the last few years on behalf of our clients here at Oportfolio, and this information about lenders dropping their SVR rates is certainly positive…although not game-changing!
Understanding The Base Rate And SVR Mortgages
Let’s get the basics clear first. The Bank of England base rate is the interest rate at which the central bank lends money to commercial banks. It serves as a benchmark for various interest rates across the economy, including those on savings accounts, loans, and mortgages. When the base rate changes, it typically influences the cost of borrowing and the return on savings, affecting everything from household budgets to business investments.
Standard Variable Rate Mortgages
A Standard Variable Rate (SVR) mortgage is a type of home loan where the interest rate can fluctuate, typically in response to changes in the base rate set by the Bank of England. Unlike fixed-rate mortgages, SVRs do not offer the security of constant monthly payments however. Instead, they provide flexibility, allowing borrowers to benefit when rates drop, although they must also contend with the possibility of rates rising. Because the base rate has come down, the SVR rate mortgages will inevitably come down. But the most interesting rates to watch from now on are the fixed rate products and whether or not they will come down.
Mortgage Lenders’ Response To The Base Rate Cut
Several high street lenders have announced that they will be dropping their SVR product mortgage rates in line with the BoE base rate drop. Here are the changes we know so far:
Coventry Building Society SVR Mortgages
Coventry Building Society has announced a decrease of 0.25% on all variable mortgage rates. This adjustment will take effect from the 1st of September, ensuring that customers see the full benefit of the base rate reduction in their mortgage payments.
Santander Standard Variable Rate Mortgage Changes
Santander has lowered its SVR by 0.25% too, bringing it down to 7.25%, effective from the 3rd of September. Additionally, all Santander tracker mortgage products linked to the base rate will see a 0.25% decrease from the same date. The lender’s follow-on rate will be reduced to 8.25%, providing further relief to borrowers.
Virgin Money SVR Rate Mortgages
Virgin Money has confirmed a reduction in its mortgage variable revert rates from 9.24% to 8.99%, passing on the full base rate reduction to its customers. The lender’s loyalty rate, for those who have held a mortgage on the same property for seven years or more, will decrease from 8.99% to 8.74%. Also, the buy-to-let variable rate will drop from 9.44% to 9.19%. These revised rates will take effect for existing customers from the 1st of September and for new customers from the 22nd of August.
Clydesdale And Yorkshire Bank
Clydesdale and Yorkshire Bank will reduce its residential SVR from 9.24% to 8.99%, while the residential offset variable rate will be lowered from 9.45% to 9.20%. The lender’s BTL revert rate and offset variable investment housing loan rate will decrease from 9.74% to 9.49%. These changes will be implemented for existing customers from their next payment date after the 22nd of August, and for new customers from the 15th of August.
Impact On Borrowers
Personally and professionally I believe that the reduction in SVR mortgages is a positive development for borrowers, as it translates to lower monthly mortgage payments and increased disposable income. Homeowners with variable rate mortgages will directly benefit from these changes, providing some financial relief in the current economic climate. However, as I have already mentioned, the really interesting thing to observe in the coming months will be mortgage lender’s reactions to the base rate reduction and how that translates to their fixed rate mortgage options. I believe that we will soon see an influx of lenders reducing their fixed rate products as well as their variables. But when this will happen? We will have to wait and see!
Speak To A Mortgage Advisor
As always, borrowers should review their mortgage terms regularly and consider whether switching to a different mortgage product or lender might offer even greater savings. Consulting with a financial advisor can provide personalised insights based on individual circumstances, and that is exactly how our experts at Oportfolio can help. If you or anyone you know is looking at getting a new mortgage, please feel free to give our team a call or drop us a message to see how we can help.
