Capped Rate Mortgages - Mortgage rate with a ceiling
A capped rate mortgage is a mortgage product which has a top ceiling rate. This ceiling rate is set for an agreed period of time, which means during that time the mortgage repayments will not rise above that top rate even if interest rates soar above it. If interest rates are lower than that capped rate then usually mortgage repayments will be charged at that lower rate. there are variations on this and before committing to a capped rate mortgage you should be aware of any variation.
Capped Rate Mortgage Example -
UK Capped Rate Mortgages
UK capped rate mortgages are mortgages that have an interest rate that is set for anything from a few months to several years. This can be seen as a benefit to a consumer because they would be aware of the most that they would have to pay in repayments. If interest rates rose above the set capped rate then they would not exceed the capped rate in repayments. If interest rates went down below their capped rate then they will usually pay less than their capped rate. Consumers can plan more efficiently if they know what the highest repayments will be, should interest rates rise.
Capped Rate Mortgage In formation
The UK mortgage lenders make their profit by locking the consumer into the UK capped rate mortgage for a set period. Should the borrower wish to swap to a different mortgage product before the end of that set term then lenders will very often penalise the borrower. Lenders may also include a penalty clause when repaying the mortgage early.
Before UK remortgaging or swapping to another lender ensure you consider any penalties.