You might choose a capped rate mortgage loan if you believe the following:
1. That UK interest rates are likely to fall during the next few years and you therefore do not want a fixed rate mortgage loan.
2.But despite your belief that rates will fall, you cannot afford to risk taking out a tracker or discounted variable rate mortgage loan just in case UK interest rates actually rise.
In effect, capped rate mortgage deals are an insurance policy against rising rates for those who believe that rates will, in reality, fall over the period of the cap but also wish to avoid the gamble of variable rates. The price you pay for security against higher rates is paying a higher rate than will be available elsewhere.
Early Redemption penalties normally apply if you wish to re-mortgage during the capped rate period. Pay close attention to the small print – some capped rate mortgages may charge redemption penalties after the end of the capped rate period (the so-called extended redemption penalty).
NB: EveryInvestor excludes mortgage offers with extended redemption penalties from its Best Buy lists.
Click here for our Capped Rate Mortgage Best Buys.
