A capped rate mortgage is a variable rate mortgage that has a fixed upper rate limit. This is otherwise known as ‘the cap’ and means that the borrower is given pre notice of the highest monthly repayments that they will have to make. Capped rate mortgages are typically a compromise between a fixed rate mortgage and a variable rate mortgages.
The good thing about a capped rate mortgage is that your payments are protected even if the interest base rate increases. This is because you have already been informed of the maximum monthly repayments that you will have to pay. It is because of this that a capped mortgage is almost the same as a fixed rate mortgage.
Having a capped rate mortgage can make it easier to setup your budgets. This is because you know exactly what your highest monthly repayments will be. It can also allow you to enjoy the benefits of any cuts made to the lender's standard variable rate.
