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Letter D
Discount rate
Mortgage companies base all their rates on what they refer to as the mortgage
base rate. What a lot of lenders offer within their portfolios are discount rate
mortgages and this is were the rate applied to the borrowing is a proportionate
discount from the mortgage base rate, so if it was a 1% discount and the
mortgage base rate was 6% then you would pay 5%.
The mortgage interest rate is lower than the current normal standard variable
rate for a certain period, usually shown as a fixed percentage reduction to the
lender's normal variable rate eg. 2.00% discount for 2 years.
It should be noted that as lenders have differing variable rates just because
one lender has a 2% discount does not necessarily mean the their deal is better
then a lender with a 1.5% discount. So always check what the rate is being
discounted from.
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