Fixed

A fixed rate loan gives you a guaranteed rate of interest for an agreed period of time regardless of whether interest rates in the economy change or not. This can be very comforting if you have a larger loan or a tight budget, because it guarantees that the payments won't rise with a change in interest rates during the fixed period.

Don’t forget though that you will not benefit from any interest rate reductions whilst on a fixed rate scheme.

Fixed rates are commonly available for periods from 2 to 5 years but some lenders offer schemes that extend to 7, 10, 15 or even 25 years.

As with all schemes, you will need to consider what your payments might revert to once the period of the scheme ends.

Capped

Capped rate mortgages offer a guarantee that the rate payable (and hence your payments) will not rise above a set level. If interest rates fall below the rate of the cap then your mortgage payments would reduce. If, however, interest rates rise above the cap, you would be protected from the full increase for the term of the capped rate.

Once the Capped rate period has expired, the interest rate will revert to the standard variable rate; this could of course be higher than the pay rate under the initial capped rate period.