Mortgages
Variable Rate Mortgages
Variable rate mortgages explained: standard variable, discounted variable, tracker and capped rates, with tracker vs variable and fixed vs variable compared.
- Published
- 11 Sep 2026
- Last reviewed
- 1 Oct 2026
- Reading time
- 8 min
Expert advice on Variable Rate Mortgages
Speak to a Mortgage Lane adviser about your options.
In short
A variable rate mortgage is a mortgage whose interest rate can change during the mortgage term, so the monthly payment can rise or fall, as opposed to a fixed rate mortgage, whose rate and payment are locked for a fixed period.
What is a variable rate mortgage?
The interest rate on a variable rate mortgage can move during the term, and there are four main types. The lender's standard variable rate (SVR) is set at the lender's discretion and is the rate a fixed or discounted product reverts to when its initial period ends, unless the lender uses a named follow-on rate. A discounted variable rate is a set discount below the lender's SVR for an introductory period. A tracker rate follows Bank Rate, set by the Bank of England, at a fixed margin, and a capped rate is a variable rate with an upper limit. A variable rate on your own home is regulated residential lending under the Financial Conduct Authority's MCOB rules, and because the rate can rise, lenders must stress-test affordability against rate increases under MCOB 11.6: the exemption for fixes of five years or more does not apply.
Variable rate mortgage rates
Each variable type is priced differently: a standard variable rate is set by the lender and moves at its discretion, usually following Bank Rate but not bound to it. A discounted variable rate is the SVR less a stated discount for a period; a tracker is Bank Rate plus a stated margin; a capped rate is a variable rate with a ceiling and sometimes a collar. The cost is compared on the current pay rate, on the payment after a rise and on the early repayment charges, which in our experience some variable products do not carry at all.
If you are weighing variable against fixed, get in touch with your loan, your plans and your view on rates. We show you the payment on each product now and after a rise before you choose.
Variable rate mortgage criteria
Variable rate terms are set product by product: the introductory period, any floor, the early repayment charges and the right to switch to a fixed rate all vary by lender. In our experience some variable products carry no early repayment charge, while others charge, for example, 2% in year one and 1% in year two. The offer sets out the terms that apply, and we check them before you choose.
Variable rate mortgage criteria
| Criterion | Value |
|---|---|
| Types | Standard variable rate; discounted variable rate; tracker; capped rate |
| Rate basis | SVR: lender's discretion; discounted: SVR less a discount for a period; tracker: Bank Rate plus a margin; capped: variable with a ceiling |
| Introductory period | Discounted and tracker products commonly run for two to five years, some for the life of the mortgage, before reverting to SVR; the periods available vary by lender |
| Early repayment charges | Varies by lender and product: in our experience some carry none, while others charge, for example, 2% in year one and 1% in year two |
| Collars and floors | Some trackers and discounted products carry a floor below which the rate cannot fall; set out in the offer and checked before choosing |
| Affordability | Standard residential affordability with the MCOB stress test against rate rises applied; no five-year exemption |
| Overpayments | Allowed within the product's terms; unlimited where no early repayment charge applies |
| Switching | Varies by lender: some variable products allow a switch to a fixed rate without charge, others apply the early repayment charge |
| Purpose | Purchase, remortgage, product transfer; residential and buy to let |
Types of variable rate mortgage
Standard variable rate (SVR) mortgages
The lender sets its standard variable rate at its discretion. It tends to move when Bank Rate moves but is not bound to it, and it is the rate a fixed or introductory product reverts to unless the lender uses a named follow-on rate. An SVR usually carries no early repayment charge and gives total flexibility, but its rate can be higher than the lender's introductory rates, so it is compared with the products available. It can suit short-term holding: between products, before a sale, or where circumstances prevent a switch.
Get in touch if you are on an SVR: a product transfer can cost less and, where no extra borrowing is taken, may need no reassessment.
Discounted variable rate mortgages
A discounted variable mortgage charges the lender's standard variable rate less a stated discount for an introductory period, commonly two to five years, after which the discount ends and the SVR applies. The rate moves whenever the lender moves its SVR, so the payment follows the lender's decisions rather than Bank Rate directly, and some products carry a floor. In our experience some discounted products carry no early repayment charge; they can suit borrowers who want a low starting rate with the flexibility to switch.
We can compare a discounted variable with a tracker on the same lender's pricing.
Tracker mortgages
A tracker follows Bank Rate plus a fixed margin, so the payment moves automatically with the Bank of England's decisions for the tracker period or for the life of the mortgage. The full treatment is on tracker mortgages.
Get in touch for a tracker.
Capped rate mortgages
A capped rate is a variable rate, such as a tracker or discounted rate, with a ceiling above which it cannot rise for the capped period, and sometimes a collar below which it cannot fall. The cap works as insurance against a rise above the ceiling, and the lender may charge for it through a higher starting rate than the uncapped equivalent; availability varies by lender.
We can work out whether a cap is worth its cost on your loan.
Variable rate buy to let mortgages
Landlords use variable products for flexibility when selling or refinancing, where no early repayment charge applies. The cost is a harder rental stress test: variable and short products are commonly stressed with a loading, while five-year fixes are commonly stressed at a lower rate (on the cases we arrange, around 4.5% against around 5.5% on two-year fixes). The mechanics are in the buy to let mortgage guide.
Get in touch for a buy to let product chosen on the stress test and the exit.
When a discounted variable period ends, commonly after two to five years, the rate climbs by the whole discount to the lender's SVR unless a product transfer or remortgage is arranged first.
Tracker vs variable mortgage
A tracker is one kind of variable rate mortgage, and it differs from the other variable types in what its rate follows. A tracker follows Bank Rate at a fixed margin, so its rate is transparent: it moves in the same direction as Bank Rate, by the same amount. A discounted variable rate follows the lender's SVR, so it moves at the lender's discretion and can differ from Bank Rate in timing and size, and the SVR itself is entirely at the lender's discretion.
Get in touch to compare a tracker and a discounted variable on the same lender's current pricing.
Tracker vs variable mortgage
| Feature | Tracker | Discounted variable | Standard variable rate |
|---|---|---|---|
| Rate follows | Bank Rate plus a fixed margin | Lender's SVR less a discount | Lender's discretion |
| Who decides changes | The Bank of England | The lender | The lender |
| Transparency | High | Medium | Low |
| Early repayment charges | Vary: some have none, in our experience | Vary: some have none, in our experience | Usually none |
| Floor or collar | Sometimes | Sometimes | No |
| Period | Commonly two to five years, or lifetime | Commonly two to five years | Open-ended |
| Suits | Borrowers who want rate movements tied to Bank Rate, not the lender | Borrowers who want a discount on the lender's rate with flexibility | Short-term holding only |
Fixed vs variable mortgage
Choosing between fixed and variable means weighing payment certainty against flexibility, on the borrower's own circumstances rather than a forecast of rates. A fixed rate locks the payment for its term and usually carries early repayment charges; fixed for five years or more, it is exempt from the MCOB stress test and so can support a larger loan. A variable rate moves with Bank Rate or the lender, is stress-tested against rate rises, may carry lower charges or none, and benefits if rates fall.
Get in touch to see the payment on a fixed and a variable product now and after a rise on your loan.
Fixed vs variable mortgage
| Feature | Fixed rate | Variable rate |
|---|---|---|
| Payment | Locked for the fixed term | Moves with Bank Rate or the lender |
| If rates rise | Protected for the term | Payment rises |
| If rates fall | No benefit until the term ends | Payment falls |
| Early repayment charges | Usually apply for the term | Vary: some have none, in our experience |
| Affordability assessment | Can be at the pay rate on fixes of five years or more | Stress-tested against rate rises |
| Borrowing capacity | Can be higher on five-year fixes | Can be lower |
| Flexibility to move or repay | Port the product if it is portable, or pay any charge | Repay freely where no early repayment charge applies |
| Suits | Borrowers who need certainty or maximum borrowing | Borrowers who expect to move, repay or see rates fall |
How a variable rate mortgage is arranged
- We start with your plans to move or repay, how much of a rise you could absorb and your view on rates, weighed against the fixed alternative.
- We compare tracker, discounted variable and capped products on the period, the floor, the early repayment terms and the switch-to-fixed option.
- The application is a standard one, with affordability assessed with the MCOB stress test applied.
- After completion the product runs, and we track Bank Rate changes and the lender's SVR changes; a switch to a fixed rate is made when the borrower's view changes.
The variable-rate arithmetic
The cost of a variable rate depends on where the rate goes, and the illustration shows the range on one loan.
The payments on an illustrative £200,000 loan over 30 years, starting at the illustrative 5.2% rate used across our guides, are set out in the table at the end of this section. The payment of £1,098.22 a month rises to £1,129.31 after a quarter-point rise and to £1,160.80 after a half-point rise, and falls to £1,037.28 after a half-point fall.
Illustrative arithmetic on hypothetical figures; 5.2% is not a product rate. Not an offer of finance.
Each quarter-point move changes the payment by roughly £31 a month on this loan; a fixed rate removes the whole range for its term. The MCOB stress test exists because of the rises in the table: a lender must be satisfied the borrower can pay at a higher rate than today's, which is why a variable product can support a smaller loan than a five-year fix on the same income.
The discount against the SVR
A discounted variable rate is the lender's SVR less the discount. When the lender raises its SVR by a quarter point, the discounted rate rises by the same quarter point and the discount stays the same size, so the borrower's protection is the size of the discount, and it lasts only for the discount period. When the discount period ends, the rate rises by the full discount unless a new product is taken, such as a product transfer or a remortgage, and the payment rises with it.
Since the rate outlook is uncertain, the choice turns on the product type, the period, the early repayment terms and the switch option, and on whether the monthly payment after a rise would be affordable.
For related reading, see tracker mortgages, fixed term mortgages and offset mortgages.
The payment after a rate move
| Rate movement | Rate | Monthly payment | Change |
|---|---|---|---|
| Fall of 0.5 points | 4.70% | £1,037.28 | £60.94 less |
| No change | 5.20% | £1,098.22 | None |
| Rise of 0.25 points | 5.45% | £1,129.31 | +£31.09 |
| Rise of 0.5 points | 5.70% | £1,160.80 | +£62.58 |
Related topics
MortgageRead more about Fixed Term MortgagesFixed Term Mortgages
Fixed term mortgages from one to forty years: how fixed rates are priced, why a five-year fix can let you borrow more, porting when you move, and the end of the term.
Tracker Mortgages
Tracker mortgages explained: Bank Rate plus a fixed margin, two-year, five-year and lifetime trackers, collars, switch-to-fix options and tracker vs fixed.
Interest Only Residential Mortgages
Interest only residential mortgages: the repayment strategy lenders require, equity and income criteria, part-and-part, offsets and retirement options.
Tracker and variable rate calculator
Shows how the payment moves if your variable rate rises or falls, against a fixed rate. Enter 1 in the buy to let box to see borrowing on rent instead of income. Rates are illustrations: use your quotes.
Frequently asked questions about variable rate mortgages
What is a variable rate mortgage?
A variable rate mortgage is a mortgage where the interest rate can move up or down during the term. The rate may be linked to the lender's standard variable rate, to a tracker rate or to another variable pricing structure, and monthly repayments change when the rate changes.
What is a discounted variable mortgage?
A discounted variable mortgage charges the lender's standard variable rate less a stated discount for an introductory period, commonly two to five years, after which the discount ends and the standard variable rate applies. The rate moves whenever the lender moves its standard variable rate, and some products carry a floor.
What is the difference between a tracker and a variable mortgage?
A tracker is a type of variable rate mortgage that follows the Bank of England's Bank Rate at a fixed margin, so its changes are external and transparent. Other variable mortgages (discounted and standard variable rates) follow the lender's own rate, which the lender changes at its discretion. Both can rise and fall.
Is a fixed or variable mortgage better?
A fixed mortgage can suit borrowers who need payment certainty or maximum borrowing, because a fix of five years or more can be assessed at the pay rate. A variable mortgage can suit borrowers who expect to move or repay soon or expect rates to fall, because it benefits from falls and, in our experience, some variable products carry no early repayment charge.
What is a standard variable rate?
A standard variable rate is the interest rate a lender sets at its own discretion for borrowers not on an introductory or fixed product, and the rate products typically revert to when their initial period ends. It tends to move when Bank Rate moves but is not bound to it. It usually carries no early repayment charge, and it can be higher than the lender's introductory rates.
Does a variable rate mortgage follow the Bank of England base rate?
Only a tracker mortgage follows the Bank of England's Bank Rate directly, at a fixed margin. A discounted variable rate and a standard variable rate follow the lender's own rate, which usually moves with Bank Rate but at the lender's discretion, and not always by the same amount or at the same time.
Can I overpay a variable rate mortgage?
You can overpay a variable rate mortgage within the product's terms. Where no early repayment charge applies, overpayments are unlimited and carry no charge, which is one of the flexibilities a variable product can offer; where a charge applies, the product's overpayment allowance sets how much can be paid without it.
Are there early repayment charges on variable rate mortgages?
Early repayment charges on variable rate mortgages vary by lender and product. In our experience some discounted and tracker products carry none, while others charge for the introductory period, for example 2% in year one and 1% in year two. We check the terms product by product.
Can I switch from a variable rate to a fixed rate?
Some lenders let you switch from a variable rate to one of their fixed rates without an early repayment charge, while others apply the charge, so the terms are checked product by product. The new fixed rate is the lender's current pricing at the time of the switch, not the rate available when the variable product began.
What happens when a discounted variable period ends?
When a discounted variable period ends, the discount stops and the mortgage moves to the lender's standard variable rate, so the rate rises by the full discount unless a new product is taken, and the payment rises with it. A product transfer or remortgage can be arranged before the end date, as at the end of a fixed term.
What is a capped rate mortgage?
A capped rate mortgage is a variable rate, such as a tracker or discounted rate, with a ceiling above which it cannot rise for the capped period, and sometimes a collar below which it cannot fall. The cap protects against rises above the ceiling and may come at a higher starting rate; availability varies by lender.
Are variable rate mortgages stress-tested for affordability?
Variable rate mortgages are stress-tested for affordability. The Financial Conduct Authority's MCOB rules require lenders to consider likely rate rises over at least the first five years, and the exemption for rates fixed for five years or more does not apply. A variable product can therefore support a smaller loan than a five-year fix.
How much does a rate rise change my variable mortgage payment?
On an illustrative £200,000 loan over 30 years at an illustrative 5.2% starting rate, each quarter-point rise changes a variable mortgage payment by roughly £31 a month: from £1,098.22 to £1,129.31. A half-point rise adds £62.58. The exact change depends on the balance, term and starting rate.
Is a variable rate mortgage good for buy to let?
A variable rate mortgage can suit buy to let landlords who want flexibility to sell or refinance, where no early repayment charge applies. Variable and short products are commonly stressed with a loading on the rental coverage test, while five-year fixes are commonly stressed at a lower rate (on the cases we arrange, around 4.5% against around 5.5% on two-year fixes), so a variable product can support a smaller loan from the same rent.
What is a floor or collar on a variable mortgage?
A floor or collar on a variable mortgage is a minimum rate below which the mortgage rate cannot fall even if Bank Rate or the lender's standard rate falls further. Some tracker and discounted products have one. It limits the benefit of falling rates, so we check the product terms before you choose.
Should I stay on my lender's standard variable rate?
A lender's standard variable rate can be higher than its introductory rates, so compare it with the products available before staying on it. Its advantages are total flexibility and, usually, no early repayment charge, which can suit a short stay before a sale or a switch. A product transfer with the same lender can cost less and, where no extra borrowing is taken, may need no reassessment.
Can I get a lifetime tracker or variable mortgage?
Some lenders offer a lifetime tracker, which follows Bank Rate at a fixed margin for the whole mortgage term with no reversion to the standard variable rate; its early repayment terms vary by product. Whether a lender offers a discounted variable rate for the whole term is checked product by product, because the discount is tied to the lender's standard rate.
What is a variable rate mortgage calculator?
Our tracker and variable rate calculator takes your loan, term and current variable rate and shows the monthly payment now, after falls of 0.25 and 0.5 points and after rises of 0.25, 0.5 and 1 point, against a fixed rate's locked payment. It also gives a guide to the maximum loan, on income for a home you live in or on rent for buy to let, so you can test whether a rise is affordable before choosing variable.
Do variable rate mortgages have lower rates than fixed?
Variable rate mortgages can have lower starting rates than fixed rates or higher ones, depending on market expectations at the time: when rates are expected to fall, trackers and discounts can start above fixes, and when rates are expected to rise, they can start below. The comparison is made on current pricing.
How long does a variable rate mortgage take to arrange?
A variable rate mortgage takes as long as any residential mortgage: the time from application to offer depends on the lender and the case. The application goes in with the product's period, floor, early repayment terms and switch option compared across lenders, and the lender runs its affordability stress test. A product transfer onto a variable rate with the existing lender can be faster where the lender does not reassess affordability.
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