What a discount mortgage actually discounts
A discount mortgage gives you a set reduction off the lender's own standard variable rate for a fixed period — for instance "2.50% off SVR for two years". Because SVRs are typically high, the resulting rate can look extremely competitive against fixed deals, and discount products often sit at the very top of a sorted rate table.
The distinction that matters, and the one most often missed, is what you're being discounted from. A tracker follows the Bank of England base rate, which is set publicly by the Monetary Policy Committee. A discount follows the lender's standard variable rate, which the lender sets itself, whenever it likes, for whatever commercial reason it likes.
The catch: the lender controls the reference rate
Your discount is contractually fixed. The thing it's applied to is not. A lender can raise its SVR without the base rate moving at all — to protect margins, to respond to funding costs, or simply because it has decided to. When that happens your rate rises with it and the discount you were sold is unchanged and unhelpful.
In practice most lenders move their SVR broadly in line with the base rate, because not doing so is commercially and reputationally awkward. But there is no obligation, and history includes plenty of examples of SVRs rising by more than the base rate or failing to fall as far when rates came down. You're accepting the lender's discretion as a risk.
Before taking a discount deal, look up the lender's current SVR and work out the actual rate you'd pay. Then check what their SVR has done over the past few years relative to the base rate. A lender that has tracked base closely is a very different proposition from one that hasn't.
Discount, tracker or fixed
Ranked by how much certainty you're getting: a fix gives you a known payment; a tracker gives you a payment that moves only with a publicly-set rate; a discount gives you a payment that moves at your lender's discretion. Pricing usually reflects that ordering, which is why discounts can look cheapest on day one.
A discount can be a sound choice when the headline saving is large, the deal has no early repayment charge, and the lender has a solid record of moving its SVR in step with base. It's a poor choice if the entire case rests on the current rate looking low, because that rate is the one thing you don't control.
Check the current SVR
The discount is meaningless without it. Two lenders offering the same discount can leave you paying very different rates.
Check for a collar
Some discount products set a floor below which the rate won't fall, limiting the benefit if rates drop.
Check the exit terms
If there's no early repayment charge you can leave the moment the lender does something you don't like — which is most of the protection you're going to get.
Common questions
What is a discount mortgage?
A mortgage priced as a set reduction off the lender's standard variable rate for a fixed period — for example 2% off SVR for two years. The discount is fixed, but the SVR it applies to can change, so your payment can go up or down.
What's the difference between a discount and a tracker?
A tracker follows the Bank of England base rate, which is set publicly and independently. A discount follows the lender's own standard variable rate, which the lender sets at its own discretion. The tracker's reference rate is transparent; the discount's is not.
Can my payments go up on a discount mortgage?
Yes. If the lender raises its standard variable rate, your rate rises by the same amount even though your discount is unchanged. This can happen without any change to the Bank of England base rate.
Are discount mortgages cheaper than fixed rates?
They often look cheaper at the outset, which is the point of the product. Whether they end up cheaper depends entirely on what the lender does with its SVR over the deal period — something you have no control over and no contractual protection against.
How current are the rates on this page?
We collect product data from the lenders we track from their published information and refresh it regularly, so the discount products above are the most recent we've seen from the lenders that offer them. Lenders can withdraw or reprice a deal at any time, sometimes with a few hours' notice, and a rate shown here is not an offer — availability depends on your circumstances, the property and the lender's own criteria.