Capped rate remortgages are similar to Fixed-rate remortgages in many ways. When choosing a capped rate remortgage, the borrower will pay a rate of interest directly linked to the lender Standard variable rate, but this will be “capped” at a maximum. Therefore, if interest rates increase, so will repayments on the remortgage but only up to the agreed capped level. At this point, if the SVR continues to climb, the borrower will only pay up to the accepted maximum.
Capped rate remortgages, like all remortgage types, have pros and cons. For instance, they offer borrowers protection if the SVR exceeds a certain level. Capped rate remortgages typically last for a fixed period, although some can last for the life of the remortgage. Any decreases in lender SVR will also be passed on the borrower. Some capped rate remortgages have a discounted introductory period and can become more expensive when this expires.