Capped rate mortgages

Interest rates for capped mortgages will not rise above a certain maximum level. This normally applies for a fixed period.

Similarly, a 'collared' rate mortgage will not fall below a minimum limit.

Pros:

• Offers protection from rises in interest rates, but you could still benefit from a drop in interest rates
• You can budget, knowing the maximum you will pay for a set period

Cons:

• Fixed rate may be lower than the cap, and if interest rates fall below the collared rate, you will not benefit
• Check for penalty clauses. You may be tied to the lender's SVR after the capped period expires