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Discounted variable rate mortgages offer a discount off a certain interest rate – most commonly a lender's Standard Variable Rate.

The discount can be for an introductory term of 2, 3 or 5 years, or it could even be for the entire term of the mortgage (a lifetime discounted rate). 

How does a discounted rate mortgage work?

A discounted rate is a type of variable interest rate – so your payments can go up and down. They work by offering a set discount off a lender's Standard Variable Rate (SVR).

When your introductory period comes to an end, you will most likely go onto your lender's Standard Variable Rate properly.

Discounted rates tend to make an Early Repayment Charge if you pay off the mortgage, or remortgage to another lender during the introductory period. However, most will let you make overpayments.

If you have a lifetime discounted mortgage, the Early Repayment Charge will probably not apply for the full term of the mortgage, but for an initial 2-5 year period.

Discounted mortgages, although they may sound like a good deal, are not necessarily the cheapest mortgage rates you can get – you may be able to find a cheaper tracker mortgage. And remember, because the rate is variable you won't get the same payment security as you get with a fixed rate.

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