UK Capped Rate Mortgage

A capped rate mortgage can be of advantage to borrowers as they offer protection against repayments going over a certain level. You agree to have a limit - a cap - on the maximum amount of interest you will pay over a particular period of time while allowing it to fall if the variable rate drops so if the interest rate is set to go up, over and above the predetermined cap rate, that was put on to the mortgage, then the borrower will still only pay the predetermined rate not the higher rate.

A capped rate mortgage puts a maximum limit on the payable interest rate you have to pay. However, should the lender's standard variable rate be below the level at which the cap is set, you get to pay that amount. Capped Rate mortgages put together one of the most attractive aspects of a fixed rate mortgage, that you know where your mortgage is going to rise to at worst and are guaranteed it not going any higher and it mixes it with a variable rate mortgage, where if base rates go down, your mortgage pay rate will follow it down.

The capped rate usually lasts for a few years, averaging around five years, however if you shop around you can find Capped Rate Mortgages that run for the entire length of the loan, some can be found with introductory discount periods. Capping the interest on your mortgage can help you to budget, as you will always know what the most amount of money is that you will have to pay.

There are also Mortgages that have a Cap and Collar. Cap being the limit on the maximum interest rate, the Collar being a limit placed on the minimum rate. The cap is set lower than with a normal capped mortgage, as an incentive for you to accept the collar. A Cap and Collar means your mortgage rate will remain within the two.

Full range of UK Mortgages: