If you can afford a level of flexibility in your payments, a capped mortgage might be for you.Capped mortgages offer a variable rate – usually tied to the lender’s Standard Variable Rate – with a guarantee that for as long as the capped rate deal lasts, your rate won’t increase above an agreed maximum, or “cap”. This means your mortgage payments can go up and down, but you have an assurance that they won’t rise above a certain amount.Capped mortgages are ideal for people who can afford a level of flexibility in their payments if the mortgage rates change, but also want an assurance that there’s a limit to how much they can rise. They have the advantage that you’ll benefit from lower payments if the rate drops, but be aware that some lenders apply a “collar” or “floor” – a minimum level below which your mortgage interest won’t fall, even if their standard variable rate drops lower.
Lenders may charge slightly higher starting rates on capped mortgages than on some other mortgage products, and it’s important to take into account not just the headline rate, but also any arrangement fees and other charges. Here at Just Mortgage Brokers you can compare mortgages to find the deal that’s right for you, and our expert mortgage advisers can help you make your decision as well as handling the application on your behalf.