What happened to Stepped Mortgages?
In the 2000′s mortgage lenders were pedalling the “stepped” mortgage, essentially it was a discounted rate mortgage with incremental changes in repayments, so the interest rate would be at a low discount and is increased over the life of the mortgage term. While it did have the benefit of smaller payments during the first few years of the mortgage the interest rate started higher and then declined in line with the “stepped” increases.
Stepped tracker mortgages would have its interest rate tied to the Bank of England bank rate. but again would be configured to either save in the preliminary payments of the mortgages or guarantee lower payments towards the end of the mortgage, these mortgages were even offered with cash back which was ideal for first time buyers and graduates.
It seems no lender uses this term anymore and is simply the old version of the current discounted mortgage, which in some cases can be stepped but usually is fixed for a period before reverting back to the original agreement.