Discounted Rate

• A "discounted rate" refers to a variable interest rate that is lower than a lender's standard variable rate. The discount is usually expressed as a percentage, e.g. 2%, below the standard variable rate for a specified period of time.

Having a loan based on a discounted rate of interest means that when interest rates go up or down so will the monthly repayments but they will remain lower than they would be at the standard variable rate. After the end of the discount period, the lender's standard variable rate of interest will usually apply to the loan for rest of the term and the monthly repayments will be higher than during the discount period.

The APR can be used to compare the cost of discounted rate loans and mortgages with other types of loans.