Discount Rate Mortgage

It won’t come as much of a surprise to find that a discount rate mortgage contains some sort of discount but where exactly?

What is a discount rate mortgage?

Basically, a discount rate mortgage is a loan at a rate of interest which is set at a certain amount below the lenders standard variable rate, usually for a set period of time. This means that the repayments will fluctuate along with interest rates but as a discount rate mortgage they will be lower than the standard variable rate repayments for the period of the offer.

Benefits of a discount rate mortgage

The main benefit of a discount rate mortgage is that during the period the discount lasts you will be saving money each month and also like standard variable rates you will benefit if mortgage interest rates go down compared to someone with a fixed rate mortgage who could end up paying more than the standard variable rate set by the mortgage lender.

Disadvantages of a dicsount rate mortgage.

A discount rate mortgage has all the disadvantages associated with a standard variable rate mortgage. If interest rates go up then you will end up paying more each month and if you are on a tight budget this could cause you financial problems. In this instance, someone with a fixed rate mortgage would benefit from having lower monthly repayments than they otherwise would have done should rates go up.

Also world markets are unpredictable and consequently so are interest rates and this means it is not as easy to plan your budget as you won’t know exactly what your monthly repayments will be.

Discount Rate Mortgage - Summary

A discount rate mortgage is generally used by mortgage lenders to entice new borrowers. They have all the advantages and disadvantages that you would get with a standard variable rate mortgage but at least you would benefit from lower monthly repayments during the discount period.


Please fill out the enquiry form below if you require more information on getting a discount rate mortgage and one of our helpful advisers will be happy to contact you.



Commercial Mortgages and Buy to let mortgages are not typically regulated by the FSA


We do not charge a fee for mortgage advice. A fee based option is available of typically 2% of the mortgage amount.
For example on a loan of £25,000 the fee would be £500

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