Capped Rate Explained
A capped rate mortgage is a particular type of mortgage product.
With a capped rate mortgage, you will have payments that are variable as opposed to fixed, and they are usually linked to a particular base rate.
However, unlike may be the case with a tracker, there will be a cap or ceiling on this particular mortgage product above which you are assured that the interest rate will not increase.
This type of product is useful for someone who knows there is a limit at the amount they can repay a month and therefore wants to be sure that they will never have to pay more than that amount.
However, it needs to be balanced with the fact that the cap is often set at a level where it is very unlikely that the rate will move, so some see this product as being less competitive than products without the cap but very little potential upside for the customer unless there is an increase in rates that no-one expected.
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We hope you find this mortgage glossary / explanation of mortgage terms useful. You might also be interested in our articles on a range of property related issues, a selection of which are listed below:- Purchasing a Penthouse
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