Capped Rate Mortgage

A capped mortgage rate is similar to the standard variable rate, but comes with an interest rate cap.

This cap will prevent the varying interest rate from going higher than expected, which could take the homeowner by surprise. The interest rate will still change as the base rates of the lender and of the Bank of England do, but it won’t go above a pre-determined number.

A capped mortgage rate deal straddles the line between a variable rate mortgage and a fixed rate mortgage, giving borrowers a limit through which they can budget; they know that they will not have to pay out more than a certain amount. Anything charged below this line becomes a benefit.

However, the cap may be set quite high in the first place and so may not ever come into play, and in general, the rates charged on any capped rate deal may be quite high.