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Capped Rates
A Capped Rate operates exactly like a fixed rate
except the interest rate can fall in line with standard variable rates should they come
down below the agreed "cap". As with a fixed rate mortgage, the borrower is
protected from sharp or unexpected rises in payments but has no risk of losing out should
interest rates fall. The borrower should be cautious of very low, short term capped rates
as they are unlikely to see variable rates trigger a decreased payment and they will
potentially suffer a payment shock when reverting to the Lenders standard variable rate.
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