The interest rate is usually low to attract borrowers. Also known as a honeymoon rate, this rate generally lasts only for or short term before it jumps up to a much higher variable rate (often Standard Variable). Rate types vary between lenders as discounted variable, fixed or capped.

 

Pros:
  • Usually the lowest available rates
  • When payments are made at the introductory rate, the principal can be reduced quickly
  • Some lenders also include an offset account
Cons:
  • Reversion rate – Most operate as basic variable loans only you wind up paying Standard Variable Rates
  • Can compromise your access to packaged banking discounts
  • Upfront costs can sometimes be higher
  • Wide variation in introductory terms, reversion rates, introductory rates and establishment makes comparison quite difficult without the right tools and experience

 

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