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28 May 2024
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Capped Rate Mortgage Explained

What is a Capped Rate Mortgage?

A capped mortgage is similar to a fixed rate in that it will not rise above a pre-set rate, known as the cap.

However if the lenders standard variable falls below the capped rate your rate will fall in line with it. If the lenders variable rate rises above the capped rate your rate will not rise above the capped rate.

Capped and Collared Mortgages

Many capped rate mortgages will have a minimum rate they can fall to known as the collar. As one of the main benefits of a capped rate mortgage is your mortgage payments reducing as interest rates fall, it is important to check the small print of a capped rate mortgage scheme.

Tracker Capped Rate Mortgages

Some mortgage lenders now offer capped rate mortgages which track track the bank of england base rate instead of being linked to the lenders standard variable rate. These tracker capped rate mortgages can be beneficial as they guarantee to fall if the bank of england reduces the base rate. In the event of a base rate change the products rate will typically change after 14 working days.

Pros and Cons of Capped rate mortgages


  • Peace of mind that your mortgage will benefit from low interest rates and not rise beyond a pre-agreed limit during the capped rate period.


  • Capped rates are generally higher than the equivalent fixed rate.
  • Early redemption penalties can be onerous and expensive.
  • You will normally have to pay an application fee when arranging your capped rate mortgage.
  • Choices are limited.

Do you want fee free Capped rate mortgage advice?

If you are interested in Capped rate mortgages or remortgages and want to speak to a mortgage advisor about Capped Rate Mortgage products please complete the mortgage enquiry form and a professional mortgage advisor will contact you.

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We normally do not charge a fee for mortgage advice, however this is dependent on your circumstances. Our typical fee would be £349


Think carefully before securing other debts against your home, your home may be repossessed if you do not keep up repayments on your mortgage.

Go Direct.co.uk is a trading style for website purposes of Go Direct UK Ltd.

Go Financial Services is a trading style of Go Direct UK Ltd which is an appointed representative of Personal Touch Financial Services Ltd which is authorised and regulated by the Financial Conduct Authority. Registered in England & Wales Company 5703224. FCA Number 456600

We normally do not charge a fee for mortgage advice, however this is dependent on your circumstances. Our typical fee would be £349