Dicounted rate mortgages offer best value

Discounted rate mortgages offer borrowers the best savings over a year, according to a new study by Your Move.

A switch to the top discounted rate deal could save mortgage holders £1,930 in the first year after switching, £100 more than a change to the best-buy fixed rate deal.

"While discounted variable rate mortgages have cheapened, fixed rates have remained, so far, stable," explained Jon Round, remortgage analyst at Your Move.

"Borrowers are still preferring fixed rate deals, not least because these fixed rates are likely to rise over the next few weeks due to increasing concerns about inflation which are threatening to scupper further base rate reductions. It may thus still be wise to choose fixed rates despite the immediate savings on discounted variable rates being higher."

However, over the full term of a mortgage, savings on fixed vs discounted rates are almost identical.

Mr Round concluded: "Both fixed and discounted rate mortgages currently offer high first year savings. Savings with discounted rates have shot up over the last month, reaching their highest for more than a year. Although fixed rate deals have changed little over the last month savings with two, three and five year deals have at least doubled since this time last year."

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