What is a Capped Rate Mortgage?

Capped mortgages come with a guarantee that they will not rise above a certain interest rate for an agreed period of time - usually one or two years. After this period, the mortgage will return to a fixed or variable rate.

Before you take out a capped mortgage, you should consider the following advantages and disadvantages:

• If interest rates rise, you know that you won’t have to pay beyond a certain amount
• If rates fall, you can still enjoy lower payments
• It’s easier to budget, as you know how much your monthly repayments will be
• Initially, you may have to pay more than a fixed or discounted mortgage.
• There are often early repayment penalties
• The capped rate only lasts for a certain period (often 2-3 years), then the mortgage usually returns to the lenders SVR (standard variable rate)