Alongside fixed-rate and tracker mortgages, two other variable-rate products come up frequently: discount mortgages and the Standard Variable Rate (SVR). Both are worth understanding, even if you don't end up choosing them, because most borrowers will encounter an SVR at some point.
What is a Standard Variable Rate (SVR)?
Every mortgage lender has its own SVR — a default interest rate that borrowers move onto automatically once their initial fixed, tracker or discount deal ends, unless they arrange a new deal beforehand. The SVR can be changed by the lender at their discretion (though usually in response to broader rate movements), and it's typically among the most expensive rates a lender offers.
What is a discount mortgage?
A discount mortgage offers a set discount off the lender's SVR for an initial period (commonly 2–3 years), meaning your rate moves up and down in line with SVR changes, but always at a fixed margin below it. For example, a "1.5% discount for 2 years" on an SVR of 7.5% would give you an initial rate of 6%, which would still move if the lender changed their SVR during that period.
Discount vs tracker: what's the difference?
Both move with an external reference, but a tracker follows the Bank of England base rate (transparent and set independently of the lender), while a discount mortgage follows the lender's own SVR (which the lender can, in principle, change somewhat independently of the base rate, though in practice SVRs usually track base rate movements over time). Because the lender has more discretion over SVR movements than over the Bank of England's own base rate decisions, trackers are generally seen as more transparent and predictable than discount mortgages.
Pros and cons of discount mortgages
| Pros | Cons |
|---|---|
| Can offer a genuinely low initial rate | Lender has some discretion over SVR changes |
| Often lower or no ERC compared to fixed deals | Payments can rise without a direct link to base rate moves |
| Simple to understand once you know the current SVR | Less predictable than a tracker for budgeting |
Why almost nobody should stay on an SVR long-term
Because the SVR is designed as a lender's default "no deal" rate rather than a competitively priced product, it's almost always more expensive than actively chosen fixed, tracker or discount deals. The only scenarios where staying on an SVR briefly makes sense are: you're about to sell the property imminently and don't want to pay an ERC on a new deal you'd barely use; you're in the middle of switching and temporarily between deals; or your financial circumstances mean you currently can't qualify for a better deal and need time to improve your position.
How to avoid drifting onto the SVR unintentionally
- Note your current deal's end date as soon as you take out a mortgage
- Start comparing new deals 4–6 months before that date
- Set a calendar reminder well ahead of the expiry, not on the day itself
- Read our related guide on what happens when your fixed deal ends for a full action plan
For more on this, see our guide on Fixed-Rate vs Tracker Mortgages: Which Is Right?.
To run your own numbers, try our Remortgage Cost & Savings Calculator.
The bottom line
Discount mortgages can offer a genuinely competitive initial rate with more flexibility than a fixed deal, but they carry more uncertainty than a tracker. The Standard Variable Rate, by contrast, is rarely a deal worth choosing — it exists mainly as a default for those who haven't yet arranged something better, and should usually be treated as a short-term holding position rather than a destination.