Head Content Writer
Director
If you're looking for a mortgage where you can be sure your monthly payments will never increase over a certain amount, even if interest rates go up, then a capped mortgage could be right for you. Among the rarest type of mortgage available, capped mortgages offer homebuyers both the stability of a fixed-rate mortgage and the potential for savings if interest rates decrease.
With a capped mortgage, your interest rate and the monthly payment will fluctuate, like a variable mortgage, but will not exceed a certain level, like a fixed mortgage. The interest rate is determined by the market, but your payment will not exceed a predetermined limit.
Capped rate mortgages have an introductory period, typically between 2-5 years, after which you'll revert to the lender's Standard Variable Rate (SVR).
If you're interested in learning more about capped mortgages and whether one might be right for you, get in touch with our team. At Echo Finance, we understand that finding the right mortgage can be complicated, but we're here to help. As a whole of market mortgage broker, we have access to the complete range of mortgage products from across the market. So whether you're looking for a fixed rate, a variable rate, or something in between, we can help you find the right mortgage for your needs.
Get in touch with us today by calling 0800 0934 914 or by filling out our online enquiry form. We'll be happy to answer any of your questions and help you find the right mortgage for your needs.
What is a capped mortgage?
A capped-rate mortgage shares similarities with both fixed and variable-rate mortgages. For an initial period of time, your interest rate will fluctuate based on market conditions, but will never exceed a pre-determined limit, or “cap.”
This type of mortgage can offer you the stability of a fixed-rate mortgage with the benefit of lower monthly payments if interest rates in the market happen to drop.
How do capped-rate mortgages work?
With a capped-rate mortgage, your interest rate will be determined by the market, but your monthly payments will not exceed a predetermined limit.
Capped-rate mortgages are often offered with an introductory period, during which your interest rate will be lower than the lender's SVR. During this time, your mortgage payments will be based on the lower interest rate, but once the introductory period ends, your payments will increase to reflect the new, higher interest rate.
Depending on your mortgage deal, early repayment charges may apply if you exit your mortgage during the initial period, but you may still be permitted to make overpayments to a certain level without penalty.
What are the benefits of capped-rate mortgages?
Capped-rate mortgages offer homebuyers the stability of knowing that their mortgage interest rate and monthly payments will never increase beyond a certain point, even if interest rates in the wider market rise.
For homebuyers who are looking to budget effectively and keep their monthly mortgage payments as low as possible, a capped-rate mortgage could be the ideal solution. What's more, you'll also benefit if interest rates fall during the introductory period, as your monthly payments will decrease along with the market rates.
Capped-rate mortgages can offer peace of mind to borrowers who are worried about interest rate rises, as they provide protection against hikes in the wider market.
If you're considering taking out a capped-rate mortgage, be sure to compare a range of deals to find the best rate and terms for your needs.
What are the disadvantages of capped-rate mortgages?
While a capped-rate mortgage can offer protection against interest rate rises, it's important to remember that your interest rate will still fluctuate during the initial period. This means that your monthly payments could go up as well as down, making it difficult to budget effectively.
Capped-rate mortgages typically have higher interest rates than variable-rate mortgages, as you're paying extra for the security of knowing that your payments won't exceed a certain limit.
Early repayment charges may also apply if you try to exit your mortgage deal during the initial period, so it's important to be aware of these before you apply.
How to compare capped-rate mortgages
When comparing capped-rate mortgages, there are a few things you'll need to take into account:
· The interest rate: this will determine your monthly payments and how much interest you'll pay over the life of your mortgage
· The cap: this is the fixed upper rate limit that you'll have to pay, even if rates in the market rise
· The introductory period: this is the length of time during which your interest rate will be lower than the lender's SVR
· Early repayment charges: these may apply if you try to exit your mortgage deal during the initial period, so it's important to be aware of them before you apply
When comparing deals, be sure to take all of these factors into account to find the best deal for your needs.
At Echo Finance, we can help you to compare a range of capped-rate mortgage deals from leading lenders. We'll work with you to find the best deal for your needs and circumstances, and our team of experts are on hand to answer any questions you may have.
How long do capped mortgages last?
Most capped mortgages will last for a period of 2-5 years, after which the interest rate will revert to the variable rate. However, some lenders may offer longer terms.
It's important to remember that early repayment charges may apply if you choose to exit or repay your mortgage during the initial period.
***
Get expert mortgage advice
If you're considering taking out a capped rate mortgage, Echo Finance can help. We're experts in the field, and we can find the right deal for you.
Capped-rate mortgages are a great way to protect yourself from rising interest rates. With a capped mortgage, your monthly payments will never increase by more than a set amount, even if rates rise.
Echo Finance can help you find the perfect capped mortgage deal for your circumstances. We have access to a wide range of deals from major lenders, and we'll make sure you get the best possible rate.
So if you're looking for peace of mind in uncertain times, a capped mortgage could be the right choice for you. Get in touch with Echo Finance today and let us help you find the perfect deal.
Find your local adviser
Frequently Asked Questions
Below you will find the answers to the questions we hear most often from Echo Finance customers:
A mortgage broker, or a mortgage advisor, is an intermediary who acts as a conduit between an aspiring borrower and a lender. It is their job to provide the mortgage applicant with impartial advice, help them choose the right product and arrange the deal with the lender.
Brokers provide services including advice on which type of mortgage to choose, providing access to exclusive rates through their lender contacts, and application support. Some can offer advice on all areas of the mortgage market, while others specialise in niche fields such as buy-to-let, bad credit, commercial finance, first-time buyers or self-employed borrowers.
People choose to apply for their mortgage through a broker because it can boost their chances of finding the right deal, while saving time and money in the long run.
- Residential mortgages: Everything from fixed-rate to tracker mortgages for first-time buyers, homemovers and remortgage borrowers
- Specialist mortgages: For borrowers who fall outside of standard lending criteria, including people with bad credit, self-employed professionals and more
- Later-life lending: Including advice on equity release, mortgages for pensioners and retirement interest only (RIO) mortgages
- Bridging & Commercial: We have specialist advisors on hand for commercial mortgages, bridging loans, development finance and more
- Insurance & Protection: Including life, home and critical illness cover for families and individuals, as well as landlord and business protection insurance
Echo Finance is regulated by the Financial Conduct Authority and is reviewed annually by an independent compliance company. All of our brokers and advisers hold industry-standard qualifications, such as CeMAP, CeRER and DipMap, where required.
We are committed to providing advice through the channels that best suit your needs. Our brokers can provide advice via phone, email, video and web chat from anywhere in the UK, but we also aim to offer face-to-face appointments for those who request them.
