Discount mortgages getting borrowers out of a fix

People faced with increased mortgage costs might be better off going for a discount-rate mortgage rather than a new fixed-rate deal when their current mortgage rate expires.

New figures from Mform.co.uk show the average cost of the top ten two-year discount mortgage deals is £1,697.04 lower than the average cost of the top ten two-year fixed-rate deals for a £150,000 mortgage – saving borrowers around £70 a month.

"Recently mortgage customers have understandably gone for certainty in the face of rate rises and that has meant fixed-rates have dominated the market," said Francis Ghiloni, Mform marketing and business development director.

Figures from May show 78 per cent of mortgages being taken out were fixed-rates, but more recent data from Mform shows just 42 per cent of customers are now applying for fixed-rates with 58 per cent going for variable deals.

"In July we have seen the trend reversed when customers have seen the true costs involved," Mr Ghiloni said.

"People who simply look at fixed-rates to the exclusion of everything else are missing out on potentially good deals. The fixation with fixed-rates is not necessarily healthy.

"Discount rates presently offer good value and also enable borrowers to benefit if rates start to come down next year as some commentators are predicting."