Merritt adds: “You'll look at peer SVRs as well. So what’s your relative position of your SVR to others? We have to consider things like conduct risk, and are we comfortable where it’s sat from a fair value perspective?
Optionality for the customer is also priced into an SVR, he explains.
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He concludes: “A customer can go on to it, they can leave at any time. There's no penalty, they can overpay, they can redeem. If you think about how mortgages are structured, we still have to fund anybody on an SVR, but that money can walk out the door at any time.”
Chloe Cheung is a senior features writer at FT Adviser
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