The Discount Mortgage

The discount mortgage is targeted at those people who are looking to keep costs down, especially in the early years of the mortgage; typically, though not exclusively, this will be the first-time buyer. For those looking for an inexpensive mortgage the discount mortgage is often the product that can make the difference between continuing to rent and purchasing your first property.

A discount mortgage is based upon the mortgage lenders standard variable rate. This is the same as the standard variable rate but with a percentage discount. For example if the mortgage lender’s standard variable rate is 6% they may offer you a discounted mortgage of 4.5% for a period of between 1 and 5 years. The mortgage rate would then increase/decrease in line with the standard variable rate minus the discount for the product term.

Although the mortgage rate fluctuates, its can also mean that you can take advantage of any low in the market of standard variable rates such as at present when variable rates are low due to the Bank of England Base Rate being considerably low. It does however carry the risk of increasing significantly also as this mortgage is not capped to prevent the rate going above a certain level.