DISCOUNT mortgages on British properties may look like good value but prospective buyers should remember the benefits are likely to be short-term with interest rates forecast to rise in the next few years.
The discounts can cut up to five per cent off the standard lending rate which now stands at 8.1 per cent. And they are the mechanism behind the extremely low rates currently being advertised for British properties.
But typically they last for only three, six or 12 months.
Nia Williams, editor of Britain's What Mortgage, said banks and building societies used discount mortgages to lure borrowers into deals which quickly revert to the more profitable variable interest rate.
She advised against signing up for a mortgage just because it offered a very low interest rate for the first six months.
'Once the discount lapses, mortgage repayments revert to the standard interest rate and buyers should be ready for [them] to double or treble,' she said.
For example, the first year's repayment on a GBP100,000 (HK$1.26 million), 20-year loan at a discounted rate of 2.8 per cent would be GBP6,780.