Discount Rate MortgagesAttractive discounts on Standard Variable rates

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Discount Rate Mortgages Explained

• Each lender has a standard variable rate of interest, and this is effectively their default interest rate that mortgage deals will revert to after the introductory period.  Discount rate mortgages are offered by lenders' to attract new business, where the lender gives a discount on their standard variable rate (usually working out to several percentage points below the SVR) for an agreed period of time.
• There is an element of risk introduced to discount rate mortgages in that standard variable rates can change at any time.  They typically reflect the Bank of England base rate, but do not need to, and indeed several national lenders chose not to pass on the recent base rate decreases to their customers in the form of a lower SVR.  The SVR is unlikely to be the best deal on the market, because this rate of interest is only available to existing customers the lenders do not need to make it attractive to new potential borrowers.
• It is becoming far more commonplace to switch between mortgage deals at the end of the initial term (move before that, and you can incur financial penalties for moving).  Many people shop around when the initial terms of their discount rate mortgages end, to check whether a better deal is available.