Types
of Interest Rates:
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SVR
SVR (Standard Variable Rate) refers to the
rate that fixed rate mortgages return to after a defined
period of fixed interest has elapsed. How “variable” the
SVR actually is depends on which direction the base rate
is going. When the base rate rises, the SVR tends to adjust
more quickly than when the base rate goes down.
Currently,
the SVR for mortgages averages at 6%, which is 2 to 4%
higher than the Bank of England base rate. A number of
websites offer SVR calculators for estimating monthly payments.
One example is the calculator provided at the BBC
website.
Example
A:
For a loan of £300,000 at a rate
of 6% for a typical 25 year mortgage, the payments are
estimated to be £1955.66
each month. The total amount you will actually pay over the
period of the loan is estimated to be £586,698.
| Loan
Amount |
£
300,000.00 |
| SVR |
6.00
% |
| Loan
Period |
25
years |
| Monthly
Repayment |
£
1955.66 |
| Total
Repayment |
£
586,698.00 |
Example B:
In the case of an interest-only mortgage for
an amount of £250,000 at a lower rate of 5%, payments
are estimated to be £1,041.66 per month, for a total
of £312,498 after 25 years.
| Loan
Amount |
£ 250,000.00 |
| APR |
5.00
% |
| Loan
Period |
25
years |
| Monthly
Repayment |
£ 1,041.66 |
| Total
Repayment |
£
312,498.00 |
|
