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Discounted Variable Rate Mortgages

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By Pete Mugleston  | Mortgage Advisor Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 10th July 2019 *

A discounted variable rate mortgage can be a fantastic tool in helping you save money on your mortgage interest. Getting the best deal on your discounted interest rate and a mortgage repayment plan that matches your financial situation can save thousands of pounds. 

But perhaps more importantly, it’ll give you peace of mind and assurance that your financial plan is sound and fits in easily with your lifestyle and long-term goals. However, it’s not without its disadvantages, and whether or not it’s right for you will depend on the specifics of your financial situation. It’s well worth taking the time to understand what a discounted variable rate offers and how it differs from other mortgage types.

In this article, we’ll cover...

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Discounted variable mortgage rate definition: What are they?

A  discounted variable rate mortgage is defined as a mortgage with an interest rate that is fixed below the providers’ standard variable rate. This means that although the amount of interest you pay on your mortgage could fluctuate, you will always be paid a certain percentage less than the standard interest rate.

Discounted variable rate mortgages explained 

This example should help you understand the basics of them...

If your lenders’ standard rate is 5.99% and you have a fixed discount of 1%, you will pay 4.99% interest. Regardless of whether the standard rate goes up or down in the future, you will always pay 1% less interest.

How does a variable discount rate mortgage work?

You can take out a discounted variable rate mortgage deal for a set period of time - usually from two to five years. 

Lenders will determine the timeframe and offer for your discounted variable rate mortgage based on your credit history, proof of income, and other factors impacting your financial situation. 

When the agreed period for your discounted rate comes to an end, you’ll be moved onto the standard. In some cases, you may be able to negotiate another discounted variable deal.

Another option is to move to another provider who may offer you a discounted variable rate. An expert mortgage advisor can help you compare best deals on the market and use your financial situation to get the best mortgage for you. Get in touch and we can connect you to an expert mortgage broker today.  

What’s the difference between discounted and fixed rate mortgages?

A fixed mortgage rate is a mortgage where your interest rates are fixed - they don’t change over time. This can be helpful if you want to carefully budget your mortgage repayments and have certainty over how much you’ll have to pay back. 

Discounted rate mortgages on the other hand could go down or up; standard interest rates are determined by the Bank of England base rate.  If interest rates go down, a discount rate mortgage can be beneficial in saving you money. However, if these rates rise, you could end up paying more even with the discount. 

So why would people want to trade certainty over repayments for the uncertainty of a discounted rate? Well, with discounted variable rates, you could benefit from paying lower interest rates for the initial period of your mortgage. Another potential advantage is that you could pay less fees if you’re able and willing to pay back more than the minimum monthly repayment. 

If you’d like help with deciding whether a discounted variable rate mortgage is right for you, call Online Mortgage Advisor on 0808 189 2301 or make an enquiry. We can connect you to an experienced variable rate mortgage advisor.

How to compare discount rate mortgages

Searching the market yourself for the best deal involves a lot of legwork, plus without whole-of-market access, how will you know you’ve gotten the best rates?

Using an online rates table is also not recommended, since these are not tailored to your personal profile and are known to give prominent placement to sponsored deals.

To get tailor-made advice and find the best deals on interest rates, speak to an expert mortgage broker. They can guide you directly to the top deals for your situation and save you time, money and potential hard searches on your credit file. 

The decision to take out a mortgage is often the most important financial decision people will make in their lives; taking the time to carefully research the market and speak to an expert will pay back dividends for many years to come.

Speak to a discount rate mortgage advisor today!

To get the best deal on a discount rate mortgage, you’ll need to shop around and get advice from a broker who can quickly compare rates against the whole market. 

A discount rate mortgage broker could save you time and money by advising you on whether or not a variable discount rate mortgage would be beneficial for your finances over the long-term. 

It takes expert market knowledge and a bigger picture understanding of mortgage types and how they fit in with different situations, to make a properly informed decision. Online Mortgage Advisor offers a 5 star service with access to whole of market brokers who are highly qualified and experienced in placing clients with their best mortgage match. 

If you have any questions about discounted variable rate mortgages and would like to speak to an expert for the right advice, call Online Mortgage Advisor on 0808 189 2301 or make an enquiry

Then sit back and relax and let us do all the hard work of finding the right advisor for your situation. We don’t charge a fee and there’s absolutely no obligation or marks to your credit rating.

Updated: 10th July 2019
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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.