Capped Rate Mortgage
Capped rate mortgages combine the best features of a fixed mortgage and discounted mortgage. The top rate you pay is fixed or 'capped' at a certain level for the set period of the mortgage term. If interest rates fall during the mortgage term, your monthly payments should fall in line with any changes to the lender's standard variable rate. This makes capped mortgages suitable for someone on a limited budget, enabling them to benefit from interest rate falls but protecting them from any rises. A major drawback that borrowers should be aware of is that, like fixed mortgages and discounted mortgages, their terms also usually include charges for early repayment, often called early redemption charges.