Capped mortgages 'will return to the market'

By Jonathan Dawes, Wed 4 Aug 2010 - Published in Mortgages

More capped mortgages are likely to enter the market when interest rates start to rise again, it has been suggested.

This week, Coventry Building Society started offering a capped mortgage with a current rate of 2.99 per cent and a maximum loan-to-value of 65 per cent. The loan will be capped at 3.99 per cent interest until June 30th 2012.

What Mortgage editor Ben Wilkie noted that many providers took capped products off the market, but claimed their return could be beneficial to some borrowers.

"They are good for borrowers who are prepared to pay extra up front on their variable rates and then have the cap for the future. [But] they never have been and they never will be the cheapest deals," he commented.

Mr Wilkie added that the products were popular with borrowers several years ago and are likely to become more common once interest rates begin to rise.

He also suggested that the reason many lenders took their capped deals off the market was uncertainty over the future Bank of England base rate, but many firms are now confident this will not jump up in the coming months.

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