Hi there, can you please explain the difference between a fixed rate mortgage and a discount.

I know basically the discount moves with the standard rate, but if you are shown a rate of say 5.64, then how do you know what the discount rate is, and does the discount rate stay the same for the mortgage term ??

Thanks

Michelle

It depends on the exact terms but a discounted mortgage often uses an interest rate that is lower than the standard rate for the first year or two of a mortgage. You need to be sure that you can afford the full amount otherwise you'll have problems after the promotion period ends. One mortgage that I've seen advertised has a fixed rate of 5.99% until 2010 then switching to the "standard variable rate" currently 7.19%. This type of mortgage caused problems in the US because many borrowers did not realise about, and could not afford, the higher rate that applies after the first couple of years.