What is a discounted rate mortgage?

Many mortgage deals include an initial discounted rate period to attract customers - offering a temporary discount on the mortgage provider’s standard variable rate.

During the discounted period the interest rate will be fixed - and any changes in the mortgage provider’s variable rate will not affect the discounted rate. The discounted period could last from 6 months up to 5 years, it’s up to you how long you want to be tied for, the reason being that you will probably have to pay redemption penalties if you want to leave the mortgage before the end of the discounted period. The interest rates offered to you will depend on how long you want the discounted period to last - i.e. you could get a discount of 1% of the standard variable rate over two years, but perhaps 2% discount over one year.

If you want your mortgage to be as cheap as possible from the outset then a discounted rate mortgage would be a good choice. You should be free to switch mortgages at the end of the discounted period without penalty, but check first. If you are prepared to switch mortgages regularly, you can choose the discounted rate mortgage every time you swap mortgage providers.