Mortgages : Capped rate mortgages
Capped rate mortgages are a mixture of fixed rate and discount rate mortgages. The interest rate is set for a period of time, but if the svr drops below that rate you pay the lower amount, however if the rate increases you are protected against paying the higher rate as your rate is capped.
Capped rate mortgages what are they?
You agree to a limit "a cap" on the maximum amount of interest you will pay over a particular period of time while allowing it to fall if the variable rate drops.
If the variable rate goes higher than your agreed capped rate then you will only be paying up to the agreed capped rate. Wheras if it falls below your capped rate then you pay less as well. So with capped rate mortgages you benefit from falling interest rates but are protected from rate rises. This allows you to know the maximum you will be paying for your mortgage.
Downside: There are only a limited number of these deals on the market and they're not thought to be very competitive because the interest rate you will be paying is going to be higher than your average fixed or discounted rate mortgage. There may also be an admin charge by the mortgage lender, though this may not be much compared to the amount you might have paid if your mortgage wasn't capped and interest rates went up. When looking for a capped rate mortgage or any other type of mortgage it pay to get independent mortgage advice.
If you are looking for advice on capped rate mortgages or any other type of mortgage try one click mortgages.
Site Sponsors
