With discount mortgages, you pay interest at the lender’s Standard Variable Rate but with a discount for a given period. Lenders usually offer discounted rates for the first few years of the loan and then switch back to their SVR.
Discounts offered are usually between 1% and 3% and are sometimes tiered. The crucial point is the lender’s Standard Variable Rate. A 1% discount off a low SVR can be worth more than a 1.5% discount off a higher one.
Pros: You will get a guaranteed saving in the early part of the mortgage, when it’s needed most. If interest rates are expected to fall, a discount mortgage may be a good bet as your monthly payments should drop when rates do.
Cons: You will not be protected from an interest rate rise so you will be unable to budget ahead accurately.
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Cobbers Hollow, Robertsbridge, East Sussex, TN325E
