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Capped Rate Mortgage

A mortgage that provides protection against rising rates by setting a maximum payable rate (the cap) for a set period. You won’t pay more than the capped rate but if rates fall and your mortgage lender’s standard variable rate drops below the cap, you will pay less. Unless your cap is combined with a discount, a substantial fall in rates is required before your payable rate is reduced. There are usually early repayment charges during the capped rate period.