Capped tracker mortgages back on the market

Some of the UK's mortgage providers are offering borrowers the option of a capped tracker mortgage to provide reassurance against the possibility of higher interest rates in the long-term.

The new products mean that borrowers will be able to protect themselves against the possibility of interest rates climbing above a specified level i.e. the capped rate set by the lender. Both Coventry Building Society and Woolwich have introduced these deals to tempt new customers seeking long-term security in a volatile market.

The former has introduced a residential three-year capped tracker mortgage deal of the Bank Rate (0.5%) plus 2.99 percentage points, which is capped at 4.99% until the end of June 2012.

Meanwhile, Woolwich is offering two different capped tracker mortgage products, both of which are capped for the first three years of the mortgage. The first is a lifetime tracker mortgage of the Bank Rate plus 2.99 percentage points, which is capped at 5.99%, and the second is an offset tracker deal of the Bank Rate plus 3.09 percentage points, which is capped at 6.09%.

This means that homeowners who take out either of these Woolwich products will still see their mortgage rates drop in line with any further Bank Rate falls, but should the rate increase above 3%, the borrower's rate will not exceed the capped rate.

David Hollingworth of London & Country mortgage brokers said that capped tracker mortgages "could well suit borrowers in the current climate".

Source: Telegraph.co.uk | Last updated: 5th March 2009

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