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Capped Rate Mortgages

capped rate mortgage

Interest rate is variable with an upper maximum for a guaranteed period.

Capped rate mortgages are a compromise between fixed rate and variable rate mortgages. There is a fixed upper rate but if the base lending rate falls or remains stable, the interest charged on it remains in line with the base rate.

Our mortgage brokers will always find the best deal for you and can help you through every step of the way.

Capped rate mortgages are a safe option. For example, if you have a fixed rate mortgage and rates fall, your repayments would not fall in line with the decrease. With a capped rate however you would benefit from any fall in rates. If you have a discount mortgage and rates rise, your repayments would increase. With a capped rate your repayments do not rise above a certain level. With a capped rate mortgage however you cannot benefit from the best rates available as better deals can be found on fixed rate and discount mortgages.

To qualify for an Equity Release plan you will generally have to be at least 55 (or the youngest joint applicant 55). The amount of cash you will receive is dependent on the equity release product chosen and the age and gender of the applicants.

The Advantages and Disadvantages of Capped Mortgages

As with all mortgages and property loans, capped mortgages have their own unique advantages and disadvantages. The following should therefore be considered before submitting your application:

Advantages of a capped mortgage

  • With a capped mortgage, you have the assurance that the rate of interest will never climb beyond a predetermined limit, irrespective of what happens to the Bank of England base rate or the lenders variable rate.
  • The limit on the maximum monthly interest rate payable is known in advance so you can confidently and accurately control your monthly outgoings long term.

Disadvantages of a capped mortgage

  • A capped mortgage works in a similar way to a variable mortgage, meaning the interest rate and your monthly repayments could increase at any time without warning.
  • Though not always the case, capped mortgage fees and charges can be higher than those of other mortgages.
  • Early repayment is possible with most capped mortgages although fees are often payable.

If you are interested in applying for a capped mortgage, it is essential to locate the best possible deal to suit your requirements. Please contact a member of the team at UK Property Finance anytime to discuss the pros and cons of capped mortgages in more detail.

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Last Updated: Jan 29, 2020 @ 11:57 am
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