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Scour the market and compare capped-rate mortgages
Your mortgage is likely to be your biggest financial commitment, so shopping around for the best deal is vital. We can help by comparing thousands of products from a wide variety of lenders, covering the whole of the market. This way, you can be confident you’re getting the right deal.
What is a capped-rate mortgage?
A capped-rate mortgage limits the amount of interest you can be charged on your monthly mortgage repayments.
It may be a good option if you want some much-needed peace of mind. In fact, you’ll always be safe knowing that your monthly mortgage repayments will never go above a certain amount.
Bear in mind, though, that your home may be repossessed if you do not keep up repayments on your mortgage.
How does a capped-rate mortgage work?
A capped-rate mortgage works much like a standard variable-rate mortgage. The interest you pay on your monthly mortgage repayments can go up or down, depending on where your mortgage provider decides to set its standard variable rate.
The difference with a capped-rate mortgage is that the interest rate can never go past a certain limit (e.g. the cap) during the deal. This is true even if the standard variable rate goes higher than this.
Essentially, you may want to think about a capped-rate mortgage as something in-between a variable-rate and a fixed-rate mortgage. Like with the latter, you know that your repayments will never go over a specific monthly rate. However, as opposed to fixed-rate deals, with a capped-rate mortgage you can benefit from rates and instalments potentially going down.
In fact, similarly to a tracker mortgage, capped-rate options may follow the Bank of England base rate. This means your repayments may go up (without surpassing the cap) or down, depending on the base rate.
How long does a capped-rate mortgage deal last?
A capped-rate mortgage deal usually lasts between two to five years. Once the deal is over, you’ll then be moved onto the provider’s standard variable rate.
At this point, you can then decide whether you want to move to another capped-rate mortgage (if this is an option). Alternatively, you can take out a different mortgage type or switch providers.
Advantages of a capped mortgage
A capped-rate mortgage can offer advantages like:
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Peace of mind that your mortgage interest-rate will never go over a certain limit, even if the standard-variable rate goes above this
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Should interest rates decrease, you’ll be able to benefit from lower, more affordable instalments
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The ability to budget your monthly outgoings. This is because you know that the cap is in place and will stop your mortgage payments from rising above a certain point
Disadvantages of a capped mortgage
Some possible disadvantages to a capped-rate mortgage include:
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Even though your interest rate is capped, it might still increase within that limit. This means that your payments would increase. This wouldn’t happen with a fixed-rate mortgage, where the payments stay the same during the deal
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Capped-rate mortgage fees might be higher than standard mortgage fees. This is because the lender is potentially sacrificing the money they make on interest payments with the cap being in place
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Ending the mortgage deal early can end up costing you more than it would with other deals
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Comparing mortgage quotes
Compare mortgage quotes with MoneySuperMarket’s mortgage comparison tool. Enter the amount of money you think you’d need to borrow for a mortgage loan, as well as how long you’d ideally want to be paying the loan back. Then, insert the price of the property you’re interested in to see which mortgage deals you might be able to get.
You’ll then be able to compare quotes from different providers by their initial monthly cost and interest rate. This includes the lender’s standard-variable interest rate you’d then be moved to, the overall cost of the mortgage, and whether there are any fees included as part of the deal.
The comparison tool doesn’t take into account your financial situation or your credit history. So, the interest rate deal you’re offered on your capped-rate mortgage or another mortgage type may be different to the quotes you see.
Is a capped-rate mortgage the right option for me?
This depends entirely on your own personal needs and circumstances. But it’s fair to say if you’re looking for both some flexibility and safety that you won’t pay more than a certain amount each month, a capped-rate mortgage could work well.
It may also be a valuable solution if you expect to obtain an increase in income in the coming months or years. In fact, even if repayments should reach the upper limit, you’ll be safe in the knowledge that you’ll be able to afford your instalments.
Capped-rate mortgages are not the most common of deals, meaning that they may be more challenging to find. In this case, you may benefit from the help of a mortgage broker who knows the market – and lenders – inside out.
What is a ‘collar’ rate?
In a nutshell, a ‘collar’ rate is the exact opposite of a ‘cap’. To be precise, a collar is the minimum rate of interest to pay in a capped-rate mortgage plan, meaning that your repayments can only go so low.
So, if your capped-rate mortgage deal comes with a collar, your rate will never go under that limit. For example, if the rate base falls to 0.5% and your collar is 1.5%, you would still have to pay 1.5%. Ultimately, a ‘collar’ acts as a safety net for lenders should interest rates plummet unexpectedly.
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Reviewed on 22 Dec 2025