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Capped Rate Mortgages
Most capped rates tend to have a benefit period of 5 years but other terms are available.
During this period the interest rate cannot exceed the "capped
rate" but if interest rates fall then you could benefit from
a lower rate. Capped rate mortgages also tend to have an arrangement
fee as well an early repayment charge. Capped rates are usually
set higher than fixed rates so unless you believe rates are
set to fall significantly you may be better choosing a fixed
rate.
It is not uncommon for capped rates to have "collars" that
put a minimum interest rate for the benefit period. At the
end of the benefit period the mortgage will revert to the lenders
standard variable rate. |
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