A lender offers a loan with a capped rate set for a certain period. During this period, the repayments of interest on the loan cannot climb above this cap. However, if the standard variable rate of the mortgage falls below this capped rate, your interest rate repayments will fall alongside it. The maximum level of your repayments is set and able to be budgeted for easily.
Tracker capped rate mortgages are a new type of loan offered by some mortgage lenders. A tracker capped rate mortgage tracks Bank of England base interest rate in the style of a normal tracker mortgage, guaranteeing to fall to a certain level alongside rates, or rise to a certain level if rates climb. The products typically change rates two weeks after an interest rate change.
Capped rate mortgages allow the borrower peace of mind, because they guarantee that interest rates will not rise beyond a certain, pre-agreed limit during the course of the capped rate period.
On the whole, capped rate mortgages are slightly more expensive that equivalent fixed-rate mortgage loans, making them less attractive to some borrowers. Furthermore, flexibility is usually limited, and early redemption penalties can be high. Capped rate mortgages also often attract high application fees, although not in all cases.
For more information about capped rate mortgage loans and to get a capped rate mortgage loan quote, please use our Mortgage Enquiry Form and one of our experts will contact you for further assistance. Alternatively, you can give us a call on .
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