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Capped Rate mortgages
Mortgages are available in a number of different interest rate options, one of which is the capped rate mortgage.
A capped rate mortgage is a variable rate mortgage which has a fixed upper rate limit (the cap). This means that you know in advance the highest monthly payment that you may have to make. For example, if a cap rate is fixed at 6% , the loan will be charged at the prevailing variable rate as long as this is not more than 6%. Capped rate mortgages are generally a compromise between fixed rate and variable rate mortgages.
Capped Rate Mortgages ..............
The advantages of the capped rate mortgage is that when interest rates are likely to rise, they offer protection for borrowers against repayments going over a certain level. This can be seen as being almost as attractive as a fixed rate mortgage. Having a capped rate mortgage can make it easier to budget when you know what the highest amount your mortgage payment could be. Having a capped rate can also allow you to enjoy the benefits of any cuts made to the lender's standard variable rate (SVR). Whilst providing peace of mind capped rates are generally more expensive than fixed or discounted rate products.