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Capped Rate Mortgages - Best4U Kettering Northamptonshire
Capped rate mortgages are essentially a combination of a fixed rate mortgage and a variable rate mortgage. For a defined term, you are guaranteed not to pay above a fixed rate of interest on your mortgage. But at the same time, you will benefit if interest rates fall below this level.
Capped rate mortgages are obviously attractive if you suspect that interest rates may rise at some point. They are available for a wide range of terms, ranging from a few months to the length of the mortgage itself.
Capped mortgages are usually more expensive than their fixed rate counterparts. So, therefore if interest rates did not fall below the capped rate during the term, then you would have been better off with a fixed rate mortgage. There may also be redemption penalties attached to these products, so make sure you know what these are before committing to this type of mortgage. Capped mortgages also tend to have collars on them these days which means that they can not go below as set rate (usually 3%) aswell.