A discounted mortgage offers a set reduction off your lender's Standard Variable Rate (SVR) for an introductory period — typically 2 to 3 years. Unlike tracker mortgages which follow the Bank of England base rate, the SVR is set by the lender and can change at their discretion.
How Does a Discounted Mortgage Work?
- Lender's SVR: 6.5%
- Discount: −2.0%
- Your rate: 4.5%
- If SVR rises to 7.0%: your rate = 5.0%
- If SVR drops to 6.0%: your rate = 4.0%
The discount stays the same, but the underlying SVR can move — and unlike the base rate, the lender has full discretion over SVR changes.
Discount vs Tracker: Key Difference
| Feature | Discount | Tracker |
|---|---|---|
| Follows | Lender's SVR | BoE base rate |
| Transparency | Lower — lender controls SVR | Higher — base rate is public |
| Predictability | Less predictable | More predictable |
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Frequently Asked Questions
- What is a discounted mortgage?
- A variable-rate mortgage where you pay less than the lender's SVR by a set amount for an introductory period — e.g., SVR minus 1.5%.
- How is a discount mortgage different from a tracker?
- Trackers follow the Bank of England base rate (transparent, predictable). Discount mortgages follow the lender's SVR, which the lender can change independently.
- Are discounted mortgages a good deal?
- They can offer low initial rates but with less certainty than fixed or tracker deals. A broker can compare the total cost against alternatives.
Sources & References
- Discount mortgages — MoneyHelper
- Interest rate statistics — Bank of England
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