The Discount Mortgage

There's a lot to be said for 'affordability'

The discount mortgage is targeted at those people who are looking to keep costs down, especially in the early part of the mortgage period; typically, though not exclusively, this will be the first-time buyer. For those looking for a cheap mortgage, the discount mortgage is often the product that can make the difference between continuing to rent (or cohabiting with parents) and placing a foot on that all-important first rung of the property ladder.

A discount mortgage is based upon the bank or building society's own rate, which is generally (though not always) directly related to the Bank of England base rate. Unlike a standard variable rate mortgage, a discount mortgage is offered at a reduced rate for the earliest portion of the mortgage repayment period.

Because discount mortgages reflect the lender's own variable rate, many discount mortgage customers have been disappointed that they haven't felt the benefit of the recent drop in interest rates brought about by the current economic downturn, in the way, for example, tracker mortgage customers have.

Unfortunately, it's very much a case of "Well, you can't have everything." Each mortgage product has its own distinct benefits: the fixed rate mortgage offers stability; the tracker mortgage offers the possibility of a reduction in interest rates (but also the risk of an increase); and the discount mortgage offers affordability. As the cost of living increases and all things financial become progressively more difficult, there's a great deal to be said for 'affordability'.

Hindsight is a wonderful thing but, ultimately, you have to select the mortgage product that works for you at the time and, preferably, going forward. The advice of a reputable mortgage broker can be invaluable, especially for the first-time buyer or those working to a challenging budget.