Capped Rate Mortgage
A capped rate is similar to a fixed rate but with a little more flexibility. The interest rate charge is given a maximum limit (the ‘cap’) that it cannot exceed. If the lenders standard variable rate rises above the cap the capped rate charge will not exceed its maximum limit and the borrower will save money. As with the fixed rate the capped rate is a promotional offer and will only last for a small proportion of the mortgage term. Capped rates are usually set slightly higher than fixed rates because the borrower has a chance of saving money when the SVR is low. This may result in the borrower making an overall saving over the term or pay more than they would with a fixed rate depending on how the base rate fluctuates over the mortgage term.
Capped rate mortgages usually have redemption penalties associated with them and, as with all promotional interest rates, the borrower will be transferred to the lenders standard variable rate once the promotional term ends. A capped rate term commonly lasts for between 1 and 5 years.
Other rates: