With this type of interest rate, the lender drops a few percentage points off its variable lending rate. Some lenders offer discounts only to first-time buyers, but others offer them to all their customers.

Some discounts tend to vary depending on the size of deposit you put down so the less you borrow the better the interest rate. Discounted rates are only on offer for a certain period of the mortgage term, say six months, a year or five years, and then the interest rate you pay reverts back to the lender’s variable rate.

Beware, if you are choosing your lender purely because of the amount of discount you will receive - you don’t get anything for nothing. The mortgage you are considering is very likely to have a number of clauses attached to it, such as arrangement fees and redemption penalties. You may also find that the lender’s standard variable rate you end up paying may not be very competitive.

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