A capped rate is a mixture between a fixed rate and a variable rate. The interest rate is guaranteed not to rise above a set level within the capped rate period but if the normal variable mortgage rate is below the capped rate then the variable rate is charged. This gives the 'best of both worlds' as the interest rate can fall but will not rise above the capped rate. However, the level at which the cap is fixed is usually higher than for a fixed rate mortgage for a comparable period of time. The lender will normally impose early redemption penalties if the mortgage is redeemed within the first few years (see Redemption Penalties ).
A capped rate sets a maximum limit on your mortgage or loan repayments More Car Insurance - Car Insurance is a legal requirment for all drivers More
a rate of interest with an upper limit but which becomes variable if the lender's standard variable rate falls below that level.