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Mortgage Advisor & Director
What is a discounted rate mortgage?
A discounted rate mortgage is a type of variable rate mortgage that uses the lender's Standard Variable Rate (SVR) as a reference rate.
The rate offered under a discounted rate mortgage is a set percentage below the SVR for a specified period.
How do discounted rate mortgages work?
The Standard Variable Rate is specific to each lender, and they set the rate.
While they take into account the Bank of England base rate and are likely to track changes, there is no guarantee. As the SVR varies between lenders, it is essential to compare the actual rate you will sign up to rather than the amount of discount applied.
What the benefits of discounted rate mortgages?
If you are planning to move house or are expecting a change in circumstance, a discounted rate mortgage with a short initial term may be beneficial to consider.
In comparison to the SVR mortgages, discounted rate mortgages offer a good deal.
What are the disadvantages of discounted rate mortgages?
As with tracker mortgages, the interest rate with a discounted rate mortgage can increase and decrease, along with your repayments. Some people prefer the security and assurance provided by a fixed-rate mortgage, which makes budgeting easier.
Discounted rate mortgages can offer low-interest rates; however, you can also find great deals with a tracker or fixed-rate mortgage. Some discount mortgages have a 'collar', that is, a rate that the mortgage cannot fall below.
As the SVR is decided by the lender, there is less transparency with interest rate changes.
What should I watch out for?
Pay particular attention to the wording around the rate; is it the discount that is being referred to or the rate itself?
Sometimes it is not clear, and it can make a big difference to your mortgage repayments.
As with all mortgages, when the initial term ends, you will be placed on the lender's SVR, meaning a sudden increase in interest rates and monthly repayments. We would recommend arranging your new mortgage well in advance; you have up to 6 months before your deal ends to organise a new one.
Which lenders offer discount rate mortgage?
There are plenty of discount rate mortgages available on the market. If you are interested in finding out more, please fill in our form or contact one of our advisors who can help you find the best deal.
Where can I learn more?
As a whole-of-market mortgage advice service, our experienced team of advisors have access to deals not available to the general public, and have helped thousands of customers to find their perfect mortgage. Complete our simple online form today to get started!
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.
