24 Hour Loans glossary of financial terms

Cap

If a financial product is said to have a cap then its interest rates are set so that they do not exceed a certain level ? this is usually set at a set rate for a fixed period of time. So, for example, if you take out a capped rate mortgage deal where your mortgage interest rate is capped by your lender at 6% then you will not pay more than this 6% for the duration of your deal even if interest rates rise higher than this rate.

This kind of deal is particularly popular with mortgage borrowers that want to take advantage of mortgage deals but that aren?t sure how interest rates are going to go. This way if interest rates do rise then the mortgage borrower has a degree of protection as they will not have to pay a higher rate than the capped rate they have agreed with their lender no matter what happen to rates in general.