Mortgage Rates: Discount Mortgages Explained

A discount mortgage is a type of variable-rate mortgage that can reduce your repayments compared with your lender’s standard variable rate (SVR), at least for a set period. If you’re weighing up your mortgage options (including around remortgaging), it helps to understand how the discount works, how long it typically lasts, and what could happen when the discount ends.

Related guides:

This guide covers discount mortgages in depth. For an overview of all variable rate types (SVR, tracker and discount), read variable rate mortgages explained.
If you’re trying to choose between a discount mortgage and a tracker mortgage, read our tracker vs discount mortgages comparison.
For a closer look at an alternative variable-rate deal, read tracker mortgages explained.
For the fixed-rate alternative, read fixed-rate mortgages explained.
To weigh up both approaches, read fixed or variable mortgage: how to choose.

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Discount mortgages

What is a discounted mortgage, and how does it work?

A discount mortgage is a variable-rate mortgage. Instead of paying your lender’s SVR in full, you pay the SVR minus a discount for an agreed period.

In practice, that means:

You start on a rate that is lower than the lender’s SVR.
Your rate can change over time because it’s linked to the lender’s SVR.
The lender can usually change their SVR when they choose (it doesn’t have to move in line with the Bank of England base rate).

A simple example

If your lender’s SVR is 5% and your mortgage is offered at a 1.5% discount, your initial rate could be 3.5%.

If the lender later changes the SVR to 6%, your discounted rate could rise to 4.5%.

If the SVR falls, your discounted rate could fall too, though lenders may apply limits depending on the product terms.

How long can you get a discount for?

Discounts are usually offered for a fixed introductory period, commonly:

2 years
3 years
5 years

Some products may offer a longer or “lifetime” discount, but this is not always available. The key point is to check exactly when the discount ends and what rate you would move to afterwards.

The main advantages of a discount mortgage

A discount mortgage may appeal if you want to reduce the starting cost of your mortgage repayments compared with staying on SVR.

Potential benefits include:

Lower repayments than the lender’s SVR during the discount period
The possibility that repayments could become cheaper if the lender’s SVR falls
A flexible option if you’re considering alternatives and want to avoid committing to a fixed rate for the full term

The main disadvantages (what to watch out for)

Discount mortgages can be a good fit for some borrowers, but they come with real risks.

Your repayments can rise. Because the mortgage is variable-rate, your rate can increase if the lender’s SVR increases.
The lender controls the SVR. Unlike tracker mortgages (which are linked to a reference rate), a discount mortgage typically depends on the lender’s SVR decisions. That means your rate could move in ways you didn’t expect.
What happens when the discount ends. If you don’t remortgage when the discounted period finishes, you’ll usually revert to the lender’s SVR (which is often higher). This can lead to a noticeable jump in repayments.
Early repayment charges may apply. If you repay the mortgage early, such as remortgaging before the discount period ends, your lender may charge an early repayment fee. The fee structure varies by lender and product, so it’s important to review the terms carefully.

Discount mortgage vs fixed-rate mortgage

It’s common to compare a discount mortgage with a fixed-rate option.

Fixed-rate mortgages: the rate stays the same for an agreed period (often 2, 3, or 5 years), giving more certainty.
Discount mortgages: the rate can change during the discount period because it follows the lender’s SVR.

When deciding between them, it helps to ask yourself:

How comfortable are you with repayment changes?
If your rate rose by a meaningful amount, would you still be able to afford the repayments?
Do you have a realistic plan to remortgage before the discount ends (if needed)?

How a broker can help with discounted mortgages

Choosing between variable-rate options is not just about the headline discount, it’s about understanding how the deal could behave over time.

A mortgage broker can help you:

Compare discount mortgages and understand how the lender’s SVR and discount structure work
Model how repayments could change if the lender’s SVR rises or falls
Consider whether a discount, tracker, or fixed-rate approach better matches your plans
Check the likely impact of early repayment charges if you remortgage before the discount ends

Lenders and product availability

Discount mortgages are offered by a range of lenders, but availability and pricing can change. The most important step is to compare options based on your mortgage size, term, and the period you want the discount for.

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