If your mortgage is only capped for a certain period as an introductory offer, when the period ends you will revert to the lender’s standard variable rate. It may be worth remortgaging at the end of the period in order to avoid this.
A capped rate mortgage is worth considering if you are taking out a mortgage during a period when interest rates are expected to rise, or if you want to be able to benefit from interest rate drops while having the security of knowing your payments will not rise above a set amount in the event of a rate rise. However, you will only benefit from a capped rate mortgage if rates do rise above the cap. If they don’t, you may have been better on a fixed rate mortgage on a lower rate. Capped rate mortgages also generally carry high penalties for those looking to remortgage before the end of the capped period. While this is a standard fact of mortgage deals, avoid lenders whose lock-in period extends beyond the end of the capped period in an attempt to keep their borrowers on the higher standard variable rate. Also take into consideration that many lenders will pull their capped rate mortgage offers in the period before interest rates are expected to rise, which may mean that if there are many capped rate mortgages available you may be better off looking at alternative mortgage types.
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