Capped and/or Collared Mortgages
Capped rate mortgages are guaranteed not to rise above a certain percentage rate for a fixed period. They can also be 'collared', i.e. the rate will not fall below a certain percentage. The two can be applied together, so that rates are guaranteed to be between an upper and lower limit for a given period.
Capped rates without a collar are usually better than fixed rates because the borrower gets the guaranteed maximum rate but can also benefit from interest rate decreases. Borrowers should also check to see if interest rates will reduce to the same levels as standard variable rates or somewhat higher ones.
An administration fee is usually charged for arranging the capped/collared loan and early repayment charges may also apply.
Your home may be repossessed if you do not keep up repayments on your mortgage.
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