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What Are Discount Mortgages?
A discount mortgage is a type of variable interest mortgage, which means its monthly payments may change from one month to the next.
The most distinct quality of discount mortgages is that its interest rate is based on the lender’s SVR or standard variable rate. Other variable interest mortgage rates are often heavily dependent on the rates set by the Bank of England.
The discount part of the name comes from the fact that the interest rate is likely discounted by 2% from the lender’s SVR. If the lender sets their SVR at 3%, the interest rate of discount mortgages will likely be 1%. Lenders may choose to raise or lower their SVR at any time.
These loans usually have a term period of two to 25 years.