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interest rates
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Discounted interest rate..

The Discounted interest rate is one if the most common of a lenders mortgage products.

Basically all a discount rate does is offer a discount from the standard variable rate (SVR) for a given period of time.

Some lenders offer a normal term based level discount rate such as a two year discount of say 1%. That means your rate will be 1% less than your lenders SVR for a period of 2 years. If their SVR increases then your mortgage will increase proportionately. See the diagram below for an example.

Please note the graph below is not accurate and is for illustrative purposes only.

Other lenders offer what is known as a stepped discount. Which is a similar principle to that of a term based discounted rate but instead of being level for the term of the discount this rate will rise of a period of time. An example of this type of product is a 3 year stepped discount may operate on the basis of a 3% discount year 1, 2% discount year 2 and culminating and ending in a 1% discount in year 3.

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