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Lender may offer a short term discount on their SVR which are cunningly called Discount Rates. If the lenders SVR is 7% and they offer 1% discounted rate for 2 years then you only pay 6%. If the SVR increases or decreases then your rate will also change, although it will always remain 1% less than the SVR.

Advantages

• Are less than the Standard Variable Rate
• May be cheaper than an equivalent fixed rate
• If interest rates fall then the rate may also fall

Disadvantages

• Will increase if the SVR increases
• Are linked to the SVR, not the BoE base rate so if the BoE rate decreases there is no guarantee that the lender will pass on the rate cut through its SVR
• When the lenders do pass on BoE rate charges then they tend to be a little more enthusiastic about passing on the rises than they do about the decreases, often creating a ‘lag’ that is in their favour.