Capped rate mortgages combine features of both variable rate and fixed rate mortgages. These loans offer the consumer quite a few benefits, but also have aspects that may be considered disadvantages.

Capped rate mortgages are classified as repayment mortgages. A portion of the capital, or loan amount, is paid with each monthly payment, along with interest charges. At the end of the mortgage term, the borrower owns the previously mortgaged property.

Base lending rates in the UK are determined by the Bank of England. The current base lending rate is reviewed monthly by the Bank of England’s Monetary Policy Committee, and a new base lending rate is established. Financial institutions base their standard variable rate, or SVR, on the approved base lending rate. Most banks and other traditional lending facilities offer a standard variable rate of two percent above the most recent base lending rate.