These are essentially discounts from the banks/building societies own Standard Variable Rates (SVR).

​

For example:
If a mortgage is a 2 year 1.5% discount it means the interest rate will be the Mortgage Lender’s SVR minus 1.5% for 2 years.
If their SVR was 5.0% then 5.0% – 1.5% = 3.5%