With a capped rate mortgage, the interest will not rise above a specified rate, for a specified period.  During this period, the interest rate can rise and fall in line with changes to the lender’s standard variable rate, but it will not exceed the specified ‘cap’.  If the interest rate rises, the monthly mortgage payment will rise; if the rate falls, the payment will fall.  Some lenders impose a ‘collar’, which means that the interest rate will not fall below a specified level.

‘At the end of the capped rate period, the rate will usually revert to the lender’s standard variable rate.  This is usually higher than the cap and therefore results in an increase to the monthly mortgage payment.

‘The lender is likely to impose early repayment charges for full or partial repayment of the mortgage during the capped rate period.  These charges may extend beyond this period in some cases.