Compare discount mortgages
Discounted Mortgages
What are discount mortgages?
A discount mortgage is a home loan on which the interest rate is pegged at a set amount below the lender’s standard variable rate (SVR), which is the interest rate your lender charges once your initial deal has ended.
The interest you pay on your mortgage each month will therefore rise and fall in line with the SVR. However, it will always remain a set amount cheaper for the term of the deal.
The mortgage rate discount can either be in place for a fixed period such as three or five years or for the lifetime of the mortgage.
How do discount variable-rate mortgages work?
A discount variable-rate mortgages works like any standard repayment mortgage: you make monthly payments that cover both the capital you borrowed and the interest you owe. These payments are calculated so your mortgage is fully repaid by the end of the term.
How your interest rate is set
Instead of having a fixed rate, your lender gives you a discount off its Standard Variable Rate (SVR), often 1–2 percentage points. Because your rate tracks the SVR (minus the discount), your monthly payments can go up or down whenever your lender adjusts its SVR.
Example of how payments change
Lender’s SVR: 5%
Discount: 1.5%
Your interest rate: 3.5%
If the SVR rises to 6%, your rate increases to 4.5%, and your repayments go up. If the SVR falls to 4%, your rate drops to 2.5%, making your monthly payments cheaper.
What affects changes to the SVR?
Lenders typically update their SVR based on:
their own funding and operational costs
wider market conditions
internal pricing decisions
While the SVR isn’t directly tied to the Bank of England base rate, it’s often influenced by movements in the base rate.
Minimum rate (“floor”)
Many discount mortgages include a rate floor, which prevents your interest rate from dropping below a certain level. This means your repayments can’t fall indefinitely, even if the SVR decreases significantly.
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How much can I save with a discount mortgage?
A discount mortgage is usually 1–2% below the lender’s SVR, so you’ll typically pay less than you would with a standard variable-rate deal. How much you save depends on how the lender changes its SVR over time.
When interest rates are low, discounts can offer strong value. But if rates rise, your repayments can increase quickly, sometimes making a fixed-rate or tracker deal cheaper overall.
If you prefer predictable monthly payments, a fixed-rate mortgage may be a better fit.
How long does a discounted mortgage deal last?
Most discount mortgage deals last 2, 3 or 5 years, though some offer longer terms and a few provide lifetime discounts that run for the full mortgage term.
As a general rule, the longer the discount period, the smaller the discount.
If you leave the deal early, you’ll usually pay an early repayment charge. When the discount ends, you’re normally moved onto the lender’s SVR unless you switch to a new mortgage.
Advantages and disadvantages of a discounted mortgage
Discount rate mortgages FAQs
What happens when the discount ends?
You'll automatically be moved to the lender’s standard variable rate (SVR), meaning you might pay more each month. At this point, you can usually save money by remortgaging to a new deal, either with the same lender or a different one. You can choose another discount mortgage, a tracker or a fixed-rate deal.
Can I pay off my mortgage before the term ends?
Yes, but many lenders will charge you for this. Discount mortgages usually impose an early repayment fee if you repay your mortgage or switch deals before the discount period ends.
Can first-time buyers get a discount mortgage?
Yes, some discount mortgages are available to people who are looking to buy their first home.
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