What is a capped mortgage?

A capped rate mortgage sets a limit on the highest rate of interest that you can possibly be charged over an arranged introductory period. This means that if interest rates rise, you’re protected to a certain extent. If they stay low, you will still be able to make the most of the lower interest rates. It’s essentially an amalgamation of the fixed rate mortgage model and the standard variable rate mortgage, enabling you to profit from decreasing interest rates, and also hedge your bets about rising interest rates.

You can also choose the 'Cap and Collar' mortgage - this sets limits on both the minimum interest rate (collar) and the maximum interest rate (cap).

The capped mortgage is a worthy alternative to the fixed rate mortgage, because you can ‘play the market’ a little more without taking too many chances.

As with fixed rate and discount rate mortgages - you will be charged redemption penalties if you want to swap mortgage provider before the end of the introductory period (1-5 years)