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UK Mortgage Types

Capped rate mortgages — more information

There are basically two kinds of underling mortgage arrangement to any contract:

1. Interest only
2. Principal and interest

Compare UK capped rate mortgage interest rates online

This page is designed to give the "pros and cons" of capped rate mortgages . If you want to compare your mortgage, or look at the possibilites for a new mortgage on capped interest, click here:

Mortgage Calculator

Capped rate interest arrangements are an interest repayment variation on a basic "principal and interest" approach.

Capped rate mortgages say they are the best of both worlds - variable and fixed rate.

There is a limit - or cap - on the maximum interest payable over time while allowing for a fall if the variable rate drops.

Pros: If the variable rate goes higher than the capped rate then payments stop at the agreed cap . If the rate varies below the cap, payments reduce.

Cons: A moment's thought will reveal why these mortgages cannot be made very competitive. The interest rate must be set higher than the average fixed or discounted rate mortgage, in order to cover the lenders exposure.

The lender's administrative charge of say, £95 to £200 is added on top, although the presence of a cap in times of rising rates could easily justify spending this amount.

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