Capped Rate Mortgages Explained

Capped rate mortgages are not very common but still do exist and are available from specialist lenders. It benefits the client in that if the variable rate reduces, the “capped” rate that the client has also does. This also applies when the rate increases but will not increase beyond the predetermined “capped” rate of the mortgage agreement.

In most cases a capped rate is higher than a fixed rate.

Benefits:

• It assures the client that interest rates cannot exceed above the agreed “capped” interest rate, but does has the benefit where it will reduce if if the variable rates drop.

Limitations:

• If rates to go up, the repayments will also go up. Even if this is to a maximum rate of the agreed “capped” rate.