The Best Discounted Variable Mortgages | moneyfacts.co.uk

Compare the Best Discounted Variable Mortgages

  - Search and compare hundreds of discounted variable rate mortgages to find the best rate to suit you.
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Compare the Best Discounted Variable Rate Mortgages

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RateAPRCMortgage TypePeriodMax LTVERCSearch all
5209 mortgages

1.39% reverting to 3.99% 3.6% Discounted Variable31/08/201965%NoneDetails...
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  Product Fee: None 

1.70% reverting to 4.74% 4.3% Discounted Variable30/06/201985%To 30/06/2019Details...
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  Product Fee: None 

1.89% reverting to 5.19% 4.8% Discounted Variable2 years90%NoneDetails...
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  Product Fee: Booking £199 

2.29% reverting to 4.99% 4.5% Discounted Variable3 years85%1st 3 yrs Details...
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  Product Fee: Completion £199, Booking £199 

1.70% reverting to 5.44% 4.0% Discounted Variable5 years85%1st 5 yrs Details...
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  Product Fee: Arrangement £499 

1.95% reverting to 0.00% 2.0% Discounted VariableTerm80%NoneDetails...
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  Product Fee: Arrangement £199, Completion £800 
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1.79% reverting to 4.70% 4.3% Discounted Variable31/08/201975%1st 2 yrs Details...
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  Product Fee: Arrangement £999 
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Last Updated: Friday 23 June 2017 14:54

Representative Example: £150,000 mortgage over 25 years initially at 2.29% variable for 36 months reverting to 4.99% variable for term. 36 monthly payments of £657.17 and 264 monthly payments of £850.81. Total amount payable £249,129.96 includes loan amount, interest of £98,272, valuation fees of £260 and product fees of £398. The overall cost for comparison is 4.4% APRC representative.

Moneyfacts.co.uk Best Buys show the best products chosen by our independent experts. Where we have been able to we have also provided a link for you to apply via Moneyfacts.co.uk today. Products shown with a yellow background are sponsored products.

Disclaimer: Credit will be secured by a mortgage on your property. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. Written quotations are available from individual lenders. Loans are subject to status and valuation and are not available to persons under the age of 18. All rates are subject to change without notice. Please check all rates and terms with your lender or financial adviser before undertaking any borrowing.

 

What you should know about Discounted Variable Rate Mortgages

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

The discount can be for an introductory term of two, three or five 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 on a lender's Standard Variable Rate (SVR).

So, if the lender's SVR is currently 5.00% and the discounted rate offers a 1.00% discount, you'll initially pay 4.00%.

Discounted mortgage rates

Then, if the SVR goes up to 6.00% at a later date, your discounted rate would go up to 5.00%. If the SVR goes down by 1.00%, your discounted rate would also go down by 1.00%. To find out when a lender may increase or decrease their Standard Variable Rate (and therefore any discounted rates linked to it), our SVR guide.

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 come with an Early Repayment Charge, if you pay off the mortgage early or remortgage to another lender during the introductory period. However, most will let you make overpayments – normally up to 10% of the outstanding balance per year.

If you have a lifetime discounted mortgage, the Early Repayment Charge will probably not apply for the full term of the mortgage, but only for an initial two to five-year period (depending on your lender).

Although discounted mortgages may sound like a good deal, they're not necessarily the cheapest mortgage rates you can get – you may be able to find a cheaper tracker mortgage, for example. And remember, discounted mortgages have variable rates, which means you won't get the same payment security as you do with a fixed rate.

Some discounted rates can only go so low

Discounted mortgage rates dip

Collar rates are becoming more common since interest rates hit all-time lows.

They basically mean that the mortgage rate, and therefore mortgage payments, can only go so low.

So, if a Standard Variable Rate was reduced to a level that sent the discounted mortgage below the collar, your payments would not go any lower than the collar rate.

Discounted mortgages: advantages and disadvantages

When interest rates are low, your payments will be lower If interest rates go up, so will your payments. An increase of just 1% could add an extra £83 a month to your repayments for a £100,000 mortgage
Discounted rates can have quite low mortgage arrangement fees in comparison to a fixed rate or tracker Although they have the word "discount" in the title, discounted mortgages may not be the cheapest rates on offer


Some discounted rate mortgages have an interest rate collar, which means that your payments can only go so low

What next?

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