Teaser rate

Definition

A teaser rate is a promotional interest rate set deliberately low to win business, after which it reverts to a far higher reversion rate or SVR. It resembles a discounted rate but is often marketed more aggressively, and the step-up can be sharp.

In plain terms

The eye-catching rate is bait; the real cost shows up when the promo ends. Judge the deal on the standard rate, not the teaser.

Why it matters for your company

Look past the teaser to the go-to rate and the total cost over a realistic holding period. See reversion rate and discounted rate.

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How lenders read it

Where a lender sees a facility priced with a teaser rate, the underwriting question shifts from "can this business afford the headline figure" to "can it afford the rate once the promotional window closes". A limited company's cash flow, forecasts and existing commitments are typically assessed against the reverting rate, not the introductory one, since that is the rate the facility will sit at for most of its life.

This matters for how a director should present the business case internally too. A board or finance team comparing offers on the strength of the teaser alone risks approving a facility that looks cheaper than a comparable one priced on a flat or discounted basis, when in practice the full-term cost tells a different story once the step-up is factored in.

Common pitfalls

The most frequent mistake is treating the teaser period as representative of the whole facility term, rather than as a short opening phase. A UK limited company reviewing renewal or refinancing options can end up anchored to the introductory figure when comparing quotes, rather than working out the standard or reversion rate that actually applies for the bulk of the agreement.

A second pitfall is overlooking the point at which the switch happens. Facilities differ in how and when the reversion kicks in, so it is worth a director confirming this timing directly with the lender rather than assuming it mirrors a previous facility or a competitor's terms. Reading the teaser rate alongside the related reversion rate and discounted rate entries helps frame the comparison properly before committing.