Capped rate home loans provide the extra security of a variable interest rate without locking in a fixed rate. You can be rewarded by capped rate home loans if the variable rate is reduced so your repayments will be less money.
Capped rate home loans offer an assurance against interest rate rises as it’s dependent on the cap. For example, if the cap rate is 7.5 percent p.a. and the capped period is three years, this means that your interest rate will not go above 7.5 percent p.a. during the first three years of the loan.
If capped rate home loans have a higher comparison rate than fixed rate home loans for the same period, or if interest rates drop rather than rise, than they may not be as competitive. However, if you think interest rates are likely to increase during the capped period, then compare home loans at RateCity to find a great deal for you.