A discount rate mortgage offers you a percentage discount from a lender's standard variable rate for a set period of time.

For example, the lenders standard variable rate may be 5.5% with a discount of 1%, making your initial interest rate 4.5%.

If the lenders standard variable interest rates rises, your repayments will also rise but you will keep the same level of discount. If interest rates fall, your repayments will fall accordingly.

The amount of the discount and the period will vary from lender to lender.

Discount rate mortgages are often the cheapest, particularly in a market where interest rates are falling. However, there are often redemption penalties associated with these products, meaning you will have a penalty to pay if you cancel your mortgage early. In addition, lenders are often slower in passing on reductions in interest rates than in passing on increases.

A professional mortgage advisor can help you to decide which is the best discounted rate mortgage most suitable for you.