Discount rate

A discount rate mortgage offers a percentage discount off the lender’s standard variable rate. The level of discount is usually fixed for the period of the discount, anything from 6 months to 5 years.

At the end of the discounted rate period you will revert to the standard variable rate or another rate that that will last for the remainder of the mortgage term.

Usually there will be a penalty charge covering the discounted rate period during which you will pay a charge for redeeming the loan.

There are some discounted rate deals without redemption penalties.

At the end of a discounted rate term, assuming there is no tie in period or penalty for going elsewhere it may be beneficial to re-mortgage to another lender.