Interest Rate Uncertainty
The uncertainty around interest rates can sound like a frightening unknown risk to cautious borrowers because a rapid increase in interest rates can have a substantial effect on the amount of money a borrower has to pay back on a monthly basis.
We live in uncertain times and stability can never be guaranteed.
As no one can accurately predict with total confidence interest rate movements it can make personal budget planning very difficult. It can be a worrying prospect to know that due to external circumstances your monthly payments may shoot up. If you donít have any provision for finding extra money when itís required rumours of base rate rises can lead to nervous moments.
Other Cost Consideration
Typically, when new owners move into a home they have a number of associated expenses to consider such as furnishing or decoration not to mention the everyday costs of living and it makes the need for predictable spending patterns even more important. A sudden rise in the interest rate can seem like an unwelcome cold shower for home buyers who are already stretching their finances. The more stretched a borrower is then the greater the knock on effect of an interest rate rise will be.
Most house buyers would like to be able to plan for two, three or even five years down the line with a degree of confidence in what their expenses will be.
Capped Rate Ė A Useful Tool
The Capped Rate mortgage can be a useful tool in helping to combat sudden increases in monthly bills which can make all the difference. The length of time that the Capped Rate extends to will depend on the specific mortgage lender and the mortgage offered.