Discount Rate Mortgages

A Discount Rate gives you a guarantee that for a period of time your interest rate will remain at a fixed percentage below the Variable Rate.

Therefore if the current interest rate is 7% and your rate is discounted by 2% (i.e. 5%) if the interest rate were to be increased by 1% then your rate would rise to 6%.

Advantages

• Gives a reduced repayment over the period of the discount
• Repayments will reduce when interest rate falls

Disadvantages

• Repayments will rise with interest rates
• May have to pay application and/or arrangement fees
• Usually a penalty payment of several months interest if redeemed during or shortly after discounted period