Capped Interest Rate Mortgage

A capped interest rate mortgage fluctuates in the same way as a SVR mortgage, or a base rate tracker but cannot rise above an agreed percentage. This agreed percentage is the "cap". This means you can enjoy the low interest rates but your monthly repayments will not rise too high when the rate rises.

As with most of the SVR variations you will be transferred back to the SVR once the agreed Capped rate period finishes. If you decide to leave the mortgage scheme before the agreed period finishes you could be charged an early redemption penalty. Some schemes also have overhanging redemption penalties. This means that the redemption charge still applies after the agreed capped rate period ends. This means you could be tied in to the mortgage scheme whilst paying the lenders SVR.

You may also have to pay an application fee when beginning a capped rate mortgage.

In essence a capped rate carries the advantages of a fixed rate mortgage, whereby you can budget more accurately knowing the maximum your monthly repayments will be. Unlike the fixed interest rate you have the potential to save money when the rate falls.

However you may often find that the "cap" associated with a capped interest rate will be slightly higher than a fixed rate.

The Mortgage Helpline (UK) Ltd is an appointed representative of Home Of Choice Ltd which is authorised and regulated by the Financial Services Authority. Commercial Mortgages and some Buy to Let mortgages are not regulated by the Financial Services Authority. Your home may be repossessed if you do not keep up repayments on your mortgage.