Discount Mortgages

Discount mortgages are a type of variable rate mortgage that offer borrowers a discount on the lender’s standard variable rate (SVR) for a set period of time. The discount is usually expressed as a percentage below the SVR, such as 1% or 2%. This means that if the lender’s SVR is 4%, and the discount is 1%, the borrower’s initial interest rate would be 3%.

Discount mortgages typically offer a lower initial interest rate compared to fixed rate mortgages, but the interest rate can still fluctuate based on changes to the Bank of England base rate or market conditions. This means that borrowers should be prepared for potential increases in their monthly mortgage payments.

The discount period is usually offered for a set period of time, such as two or three years, after which the mortgage will usually switch to the lender’s SVR or a tracker rate. Borrowers should also be aware that there may be early repayment charges or other fees for ending the mortgage early.

Discount mortgages may be suitable for those who are comfortable with some uncertainty in their mortgage payments, and who are looking for a lower initial interest rate. However, borrowers should seek professional financial advice to determine whether a discount mortgage is appropriate for their individual circumstances.