Capped Rate Mortgage

A capped rate mortgage puts a maximum limit on the interest rate that you have to pay. You therefore gain the security of having a 'ceiling' or upper limit to the amount that the lender can increase the interest payable on your mortgage.

This period of capped interest is for a specified period only; typically between one and five years. At the end of the specified period your mortgage will usually revert to a variable rate.

Although this arrangement initially sounds attractive, some capped rate mortgages also have a 'collar' or lower limit below which the interest on your loan cannot fall.