Discounted mortgage rates 'cost more'

Recent research has shown that a mortgage with a large initial discount costs more in the long run than a long term low tracker or standard variable r

17:14 23 November 2004

Recent research has shown that a mortgage with a large initial discount costs more in the long run than a long term low tracker or standard variable rate (SVR) option.

Choosing an initial discount mortgage with a high ongoing standard rate for 100,000 will cost 1,840 more over five years than a mortgage which does not go over one per cent over base rate, the internet bank found.

Andy Deller, director of banking and insurance at Egg - which carried out the research - said: "Discounted rate mortgages are popular with homeowners for good reason, as they help initially to reduce outgoings.

"However, for the typical borrower avoiding loans with a high ongoing standard rate is more important.

"Our research shows that on average once borrowers start paying this ongoing rate they have a mere 14 months to remortgage before all of the benefit of their initial discount is destroyed."