Capped Rate Mortgages

A Capped rate mortgage is where there is a maximum interest rate for a set period of time so in one respect is similar to a fixed rate but unlike a fixed rate that remains constant a capped rate will track the interest rate downwards if the Bank of England base rate should fall.

So in essence a Capped rate will protect you from increases in interest rates but allow you to benefit from any falls in the Bank of England base rate so that your repayments would reduce if interest rates fell, although they could rise again to the capped figure.

Like a fixed rate, a capped rate mortgage will come with an arrangement fee from the lender because again they will have purchased the money in the money markets at a particular rate.

There are however very few Capped rates available from lenders at present.

If you have chosen a capped rate mortgage to last for example 2 or 3 years, once this promotional period comes to an end the rate will normally revert to the lenders standard variable rate (SVR). Your advisor at Grovelawn Financial would always contact you the customer 2 - 3 months before the end of the promotional capped rate period to then see what is best for you and what your current circumstances may demand. The advisor will calculate what is best for you whether to stay with the same lender and perhaps switch to a further promotional capped, discount, tracker or fixed rate for another set period or move to an alternative lender that may be offering incentives that may include a free valuation and or free legal services or even a cash back incentive in order to encourage you to move lenders and ultimately offer a more competitive deal to move your mortgage.

It will depend though on your own current financial situation and your mortgage advisor would look at all costs involved in redeeming your existing mortgage against the opportunities offered by an alternative lender.

Your property may be repossessed if you do not keep up repayments on your mortgage.

For more information on how we are paid for mortgages please click here.

Grovelawn Financial Services, 1C Restormel Industrial Estate, Liddicoat Road, Lostwithial PL22 0HD — T: 01208 872689