Capped Rate

From CEOpedia | Management online

The capped rate says exactly the maximum that you have to pay every month. You can pay less interest than a fixed interest rate agreement because there is no lower ceiling. At the beginning, the mortgage rate is lower than the upper limit. The interest rate can reach as high as the upper limit. If, after reaching the limit, the base rate is raised again, the mortgage payments will not be changed. Most often, offers with a limited rate are 3, 5 or 10 years old(Melanie Bien 2011). The limited rate can not exceed the specified upper limit ( Sarah O'Grady 2004).

The capped rate has legal force usually from one to five years in the same way as the fixed rate. The mortgage usually returns to the lender's standard credit after the capped rate. So it is very important to check what will happen after the limit rate. At the very beginning, lenders will be attracted by a very low maximum rate to encourage you to take advantage. At the very end, however, the capped rate may charge a high variable interest rate. Very often, additional preparation fees as well as compulsory insurance come to the reduced rates. With these fees, a mortgage can become much more expensive (Maxwell Hodson 2003,p.61).

Capped-rate mortgages are the rarest types of loans because they are loans with a higher floating rate than a discounted loan or a mortgage with the best interest rate (Tony Boczko 2016, p. 64).

Sources of revenue

One of the main sources of revenue for the Union is the national contribution based on a capped rate of annual gross national income (GNI) generated in each Member State (M. Donald Hancock, Christopher J. Carman, Marjorie Castle, David P. Conradt, Raffaella Y. Nanetti, Robert Leonardi, William Safran, Stephen White 2014, p. 692).

Other sources are (M. Donald Hancock, Christopher J. Carman, Marjorie Castle, David P. Conradt, Raffaella Y. Nanetti, Robert Leonardi, William Safran, Stephen White 2014, p. 692):

  • customs duties on industrial and agricultural imports, which are collected at the point of entry and automatically transferred to Brussels,
  • percentage of the basis used to calculate value added tax (VAT) in each Member State.

New mortgages in 2010 were divided into variable and fixed rates. A very large part of the debt is a mortgage in Great Britain, therefore small changes in interest rates can change a lot (George Callaghan, Ian Fribbance, Martin Higginson 2011, p.154).


Capped Raterecommended articles
High-ratio mortgageFlat interest rateSecond chance loanSwingline loanReversionary bonusCommercial rateAutomatic Premium LoanVendor FinancingNotice account

References

Author: Dominika Duda