UK Discounted Variable Rate Calculator
Calculate your effective interest rate on a discounted variable rate mortgage — SVR minus your discount. See monthly payments during and after the discount period, compare against a tracker mortgage, model the reversion payment shock, and calculate Early Repayment Charges if you switch early. All figures in GBP.
A discount mortgage tracks your lender's SVR (which the lender controls). A tracker mortgage follows the Bank of England base rate (transparent and publicly set). Enter tracker details to compare.
| Metric | Discount Mortgage | Tracker Mortgage |
|---|---|---|
| Rate Reference | Lender SVR (7.50%) | BoE Base (5.25%) |
| Current Rate | 6.00% | 5.74% |
| Monthly Payment | £1,611 | £1,571 |
| Who Controls the Rate? | Your lender | Bank of England |
| Transparency | Low — lender discretion | High — publicly set |
Discount mortgages typically carry an Early Repayment Charge (ERC) of 1-5% if you switch lenders during the discount period. Calculate whether switching is worth it.
How to Use the UK Discounted Variable Rate Calculator
Enter your lender's SVR, the discount percentage off that SVR, and the discount period in years. The calculator shows your effective rate during the discount period, your monthly payment, and what happens when the discount expires and you revert to the full SVR.
What Is a Discounted Variable Rate Mortgage?
- Discount off SVR: You pay the lender's Standard Variable Rate minus a fixed percentage discount (e.g. SVR 7.5% minus 1.5% = effective rate of 6.0%)
- Variable, not fixed: If the SVR changes, your rate changes by the same amount — unlike a fixed-rate mortgage
- Lender controls SVR: The lender can move the SVR independently of the Bank of England base rate
- Reversion risk: After the discount period, you automatically revert to the full SVR unless you remortgage
- Often fee-free: Discount mortgages frequently carry no arrangement fee, unlike fixed rates
Formula: Discount Rate Calculation
Monthly Payment = P × [r(1+r)&sup n;] ÷ [(1+r)&sup n; − 1]
where P = principal, r = monthly rate, n = months
Payment Shock = Monthly Payment at SVR − Monthly Payment at Discount Rate
Example (£250,000 mortgage, 25 years):
SVR = 7.50%, Discount = 1.50%
Effective Rate = 7.50% − 1.50% = 6.00%
Monthly during discount = £1,611
Monthly after reversion (at 7.50% SVR) = £1,845
Payment shock = +£234/month
Discounted Rate vs Tracker Mortgage
A discounted variable rate and a tracker mortgage both have variable payments, but they track different benchmarks. Understanding the difference is critical to choosing the right product.
Key differences
| Feature | Discount Mortgage | Tracker Mortgage |
|---|---|---|
| Tracks | Lender's SVR | BoE Base Rate |
| Who sets the rate? | Your lender (discretion) | Bank of England (public) |
| Transparency | Low | High |
| Rate formula | SVR minus X% | BoE base + X% |
| Can lender move independently? | Yes | No — must follow BoE |
The key risk with a discount mortgage is that your lender could raise the SVR even if the Bank of England holds rates steady — a situation that occurred for many borrowers after the 2008 financial crisis.
Worked Example: Is the Discount Worth It?
Scenario: £250,000 mortgage, 25-year term, SVR 7.5%, 1.5% discount for 2 years
| Metric | Value |
|---|---|
| Effective rate during discount | 6.0% |
| Monthly payment (discount period) | £1,611 |
| Monthly payment (post-discount, SVR 7.5%) | £1,845 |
| Monthly saving vs SVR | £234/mo |
| Total saved over 2-year discount period | £5,616 |
| Payment shock at reversion | +£234/month (+14.5%) |
The saving is meaningful — but only if you remortgage at the end of the 2-year period before reverting to the full SVR. Always set a diary reminder 3-6 months before your discount ends.