Capped Rate
The lender caps the interest rate for an agreed period of time. If the lender’s standard variable rate goes above this capped figure you will pay no more than the agreed cap.
If the rate drops below your capped rate you will pay the reduced amount, until either the interest rate rises again or the agreed period ends.
This gives you the security of a fixed rate, but with the added advantage that you could pay less if rates fall.
Capped rates are not common and due to the fact that the payable interest rate mcan go down, the rate at which a cap would be set is usually (but not always) set at a higher rate than a fixed interest rate.
After the capped period, the ongoing interest rate usually reverts to the lender's standard variable rate.
