Content reviewed: 13 January 2026
What is a discount rate mortgage?
A discount mortgage offers a set percentage discount off your lender's Standard Variable Rate for a fixed period, typically 2-5 years. For example, with a 2% discount on a 7% SVR, you'd pay 5%. The discount stays fixed, but your rate can still change if the lender adjusts their SVR. Unlike trackers, SVR changes are at the lender's discretion.
What is a discount rate mortgage?
A discount mortgage offers a percentage off your lender's SVR for a set period. With a 2% discount on a 7% SVR, you pay 5%. While the discount stays fixed, your rate can change if the SVR changes. Your Home Finance compares discount deals to find the right option for you.
What is a Discount Rate Mortgage?
A discount mortgage offers a set percentage discount off your lender's Standard Variable Rate (SVR) for an agreed period—typically 2, 3, or 5 years. For example, if your lender's SVR is 7% and you have a 2% discount, you'd pay 5% during the discount period.
The important thing to understand is that while the discount percentage stays fixed, your actual rate varies because the SVR can change. If your lender increases their SVR to 7.5%, your rate would increase to 5.5%—you still get the 2% discount, but you're paying a higher rate. Similarly, if SVR falls to 6.5%, you'd pay 4.5%.
Discount mortgages were more popular in the past but have largely been replaced by tracker mortgages, which follow the Bank of England base rate more transparently. The key challenge with discounts is that lenders can change their SVR at any time and at their discretion, making your rate less predictable than a tracker and offering no certainty like a fixed rate provides.
Key Features of Discount Mortgages
Get a set discount off your lender's Standard Variable Rate for a fixed period
Often lower initial rates than fixed mortgages, potentially saving money early on
If your lender reduces their SVR, your rate falls too while maintaining the discount
Discount mortgages sometimes have lower arrangement fees than equivalent fixed rates
Expert Insights on Discount Mortgages
Discount mortgages offer a percentage discount off the lender's SVR for a set period (typically 2-5 years). For example, if SVR is 7% and you have a 2% discount, you pay 5%. If the lender increases SVR to 7.5%, you pay 5.5%—you keep the 2% discount but your rate still rises. The discount stays constant, but the actual rate you pay varies with SVR movements.
The big risk with discount mortgages is that lenders can change their SVR whenever they want. Unlike trackers which follow base rate automatically, SVR changes are at the lender's discretion. Your lender might increase SVR more than base rate rises, or not pass on full base rate falls. Your 'discount' rate could end up higher than current fixed rates if SVR is increased significantly.
Discount mortgages are similar to trackers—both are variable rates that can go up or down. But trackers follow base rate transparently while discounts follow the lender's SVR which changes at their discretion. Trackers are generally more transparent and fairer. Discount mortgages have become less popular as trackers offer better value and certainty. Always compare both options.
Most discount mortgages have ERCs during the discount period, similar to fixed rates. You'll pay penalties (typically 1-5% of outstanding balance) if you remortgage or repay during the term. Some allow 10% annual overpayments without penalty. Check ERC structure carefully—the discount must be worthwhile enough to justify being tied in, especially given the SVR risk.
Discount mortgages can work if: the lender has a historically stable SVR, the discount is large (2-3%+), you believe SVR will fall or stay stable, and the initial rate is very competitive. However, the unpredictability of SVR changes makes them risky. Most borrowers are better served by fixed rates (certainty) or trackers (transparent base rate link) rather than discounts.
At the end of the discount period (typically 2-5 years), you move onto the lender's full SVR with no discount—typically a 1-3% rate increase. This is when you should remortgage to a new deal. Set a reminder 3-4 months before the discount period ends. The lender may offer retention deals, but whole-market comparison usually finds better rates.
Frequently Asked Questions
Find the Right Variable Rate
Not sure whether a discount, tracker, or fixed rate is best for you? Our advisers will compare all options to find the most competitive deal for your circumstances.