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A capped rate mortgage is similar to a fixed rate mortgage except that the interest rate can go down if the Bank of England Base Rate is lowered.

In other words, the interest rate on the mortgage is capped at a certain level for a set number of years. It is guaranteed not to exceed this level during the capped rate period.

In many ways this is the best of both worlds as you get the security of knowing what your maximum monthly repayments will be for a fixed period, but you can still benefit from any reduction in interest rates.

As with fixed rates, there are normally arrangement fees for this type of mortgage, and it is important to seek advice on whether the benefits of a capped rate deal outweigh any fees that may be charged.

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