A Uk capped mortgage ensures that the interest rate
does not rise above a predefined threshold, the capped rate.
The interest rate is usually the same as the lender's standard
variable rate, but will not rise above the capped rate.
Capped rate mortgages are also available in conjunction
with some discount mortgages.
Pros and cons of Capped Mortgage
Advantages You can benefit from a fall in the Bank of England's
base rate that leads to a subsequent fall in your lender's
standard variable rate. At the same time you remove the
risk of the interest rate increasing beyond a known level,
allowing you to budget more easily.
Disadvantages Early redemption penalties will almost certainly
apply, which may also extend beyond the end of the discounted
period. This means you will be unable to change your mortgage
during the 'early redemption penalty period' without paying
a fee, which may be up to the value of six months mortgage
repayments. So, you may be trapped in an uncompetitive rate
once the interest rate reverts to the lender's standard
variable rate. You will normally have to pay an application
fee when arranging your capped mortgage.
Here we have compiled a collection of websites we feel
may be of use to our visitors. If you feel you have a website
you would like to submit to our resources pages please click
here.
