Capped
Capped rate mortgages are actually a type of variable rate mortgage, but with an important difference: they have an interest rate ceiling, or cap, beyond which your payments can’t rise.
A capped rate is normally only for an introductory period, which can typically be anything from two to five years. They are also the rarest of all types of mortgage – most of the time there are only a handful of capped rate products available in the whole market!
They guarantee that your mortgage payment won’t go above a certain level, but because they are a kind of variable rate, they also let you benefit from lower payments when rates go down.
Advantages and Disadvantages
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When interest rates are low, your payments will be lower |  |
Interest rates can still go up on a capped mortgage, albeit only up to a point. |
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You get the security of knowing that your payments won’t go above a certain level | |
Capped rates can be more expensive at the outset than the best tracker or discounted rates on offer |
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You’ll have to look hard for a capped rate, as there are rarely ever more than a handful of products available | ||