What is a discounted rate mortgage?

Most mortgages offer an initial discounted rate period as it is this which attracts borrowers in the first place - offering an introductory discount to the lender's standard variable rate.

During the discounted period the interest rate will stay the same - regardless of changes in the mortgage provider's variable rate. The discounted period could be anything from 6 months up to 5 years, but rates within the discounted period will depend on how long the initial period lasts. For example, could get a discount of 1% of the standard variable rate over 2 years, but maybe 2% discount over 1 year.

If you want to keep your initial payments down then a discounted rate mortgage is a good choice. Check the small print of your mortgage, you should be able to swap mortgage lender at the end of your discounted period - although there may be redemption penalties to pay. In this way you can take advantage of the discounted rate mortgage every time you swap lenders.

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