Capped Rate Mortgage Disadvantages

Capped Rate

Capped mortgages are guaranteed not to exceed a certain interest rate for a set period, usually up to two years.

Mortgage Disadvantages

Get a Free Quote Disadvantages to Capped Rate
If Capped Rate mortgages offer all the advantages of predictability of the Fixed Rate mortgage AND the lower rate flexibility of a Variable Rate mortgage what are the disadvantages

Inevitably the obvious attractions of a Capped Rate mortgage have to be paid for. The risk of sudden large rate rises is being transferred to the lender and for that there is a cost.

A Capped Rate Mortgage Is Less Competitive
Capped Rate mortgages traditionally have tended not to be as competitive in cost as some other mortgages such as Fixed Rate mortgages. The lowest possible rate in the market is unlikely to be available to the Capped Rate mortgage borrower.

As well as higher rates there has also been less choice available in the market with fewer Capped Rate mortgages on offer to borrowers making comparisons and shopping around more tricky. Simply finding a Capped Rate mortgage thatís provided by your particular favoured lender may not be possible.

Fees and Penalties
Another consideration is that admin fees are often attached to the setting up a Capped Rate mortgage which should be seen in the context of the possible savings to be made if interest rate drops.
The other cost to investigate is whether there are any penalty clauses covering the early repayment or transfer of the mortgage. Such clauses are often associated with Capped Rate mortgages.

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