What is a Capped Rate Mortgage
This mortgage is a product comprising one of the most attractive aspects of a fixed rate mortgage. It mixes a variable rate mortgage, where if the base rates go down, the mortgage payments will follow, but never exceed the cap that was set originally.
Length of Capped Rate Mortgages
Capped rate mortgages typically last for a few years, i.e., around five years, but they can be capped for the entire life of the mortgage. Some capped rate mortgages come with introductory discount periods.
Advantages of a capped rate remortgage:-
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When interest rates are likely to rise, they offer protection for borrowers against repayments going over a certain level, removing the fear of over-sized mortgage repayments.
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Capped mortgages make it easier to budget your expenses when you know how much your payment amount could be capped to.
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Remember that in addition to this, you can enjoy the benefits of any cuts made to the lender's SVR.
Disadvantages of a capped rate remortgage:-
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The rate payable can usually be higher than that available on comparable Fixed Rate Mortgage or a Discounted Rate Mortgage.
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This is a conservative choice, as your not getting the cheapest rate on the market.