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Discount rate mortgage

Some buyers may be able to access what is known as a discount rate mortgage. This is exactly as it sounds, a mortgage deal that will offer a discounted interest rate for a fixed time period, usually 2 years.

This can be a very appealing option for buyers, with a great potential for savings on monthly repayments. If you can find a lender that is offering a discounted rate, this is a deal that is worth some consideration.

About discount rate mortgages UK

A discount rate mortgage is a type of variable rate mortgage. In this case, the lender will usually offer a discount on their standard variable rate (SVR) when charging you for the interest element of your repayments.

For example, if the current base interest rate your lender charges is 3% and you have a 1% discount applied to your mortgage, you will pay 2% interest on your loan. If their SVR increased by 1% to 4%, you would then be paying 3% interest as your mortgage will track and adjust according to this rate.

If wanting the flexibility of a variable rate mortgage, a discounted deal can be a great way to have this as well as additional savings. You will be guaranteed to pay a rate lower than the SVR of your lender for a fixed period.

To learn more about other types of variable rate mortgage CLICK HERE.

Best discount rate mortgage

When considering the ‘best’ mortgage deal, there are a lot of factors to consider including length of mortgage term, amount of capital needed and of course what interest rate you will be paying.

Discounted rates can be a very popular option, particularly with first time buyers with a more limited budget or property investors with multiple buy to let mortgages to keep track of.

To find the right discount mortgage, it will be worth comparing the available deals across the market. Through comparison you may find one lender that both suits your needs and is offering a higher percentage discount compared to others.

There are 100s of lenders currently operating in the UK so it can sometimes be difficult to know where to start when looking for the right mortgage. If you need FREE expert advice speak to an independent mortgage specialist.

Benefits of discount rate mortgages

Discounts and savings will always be beneficial when it comes to significant expenses such as mortgage repayments. With variable rate mortgages being a popular choice, this type of mortgage plus a discount can lead to numerous benefits for buyers. These include:

  • Your payments will always be lower than your lender’s SVR
  • If the SVR decreases, your repayments will decrease in line with this
  • You may be able to avoid fees such as early repayment charges (ERCs) which tend to be tied into fixed rate mortgages
  • Fixed rate mortgages can work out more expensive in some cases, as these will not adjust their interest rates depending on SVR changes, Bank of England base rate changes etc.

Anyone with a tighter monthly budget may want to consider taking out a mortgage with a discounted interest rate.

It is important to remember though that at the end of the set discount period, you will be automatically switched onto your lender’s standard variable rate. This change will mean a price increase for your monthly repayments.

If coming towards the end of a discount period, it could be worth considering a remortgage to another discount deal with a new lender or swapping to a fixed rate mortgage.

Mortgage advice for discount rates

When searching for a discount rate mortgage, our main advice will always be to compare the available deals across the mortgage market. With a lot of lenders currently operating in the UK, it is best to make sure you are checking the deal you choose is the best available.

Our experts can help you check deals across over 50 of the UK’s best mortgage providers. With access to so many great deals and lender, we will always make sure to find you the best terms with the most competitive pricing possible.

Mortgage specialists for discount rates

Our team of independent mortgage brokers have years of experience in all mortgage types including buy to let mortgages, first time buyer mortgages and many more. This means we are ideally placed to offer expert advice and support to help you with every stage of your property purchase.

Speak to our experts to find a great deal for your mortgage or remortgage. We are dedicated to ensuring every buyer finds the perfect mortgage deal for their needs and budget.

Other types of variable rate mortgage

There are several other types of variable rate mortgage available if a discount rate doesn’t seem the right choice for you. The two other types of variable rate are:

  • Standard variable rate: a standard variable rate (SVR) is a common type of variable rate mortgage. The interest rate you pay will change if your lender changes their base interest rate.
  • Tracker rate: where your interest rate will adjust to any increases or decreases in the Bank of England base interest rate.

Useful resources

Bank of England – Interest rates and bank rates

Bank of England – Official bank rate history – Average mortgage interest rates in the UK from March 2000 to August 2022