An interest rate cap determines the maximum interest rate on your housing loan. So even if interest rates were to rise significantly, your interest rate will not exceed the agreed cap. It allows you to enjoy the current low interest rates without having to worry about their rise. It can be added to new and existing housing loans alike.
If you hedge the interest rate on your housing loan with an interest rate cap, the reference rate on your loan will not exceed a certain level even if interest rates started to rise. If interest rates fall, however, you will reap the full benefit of the drop.
The reference rate on your loan tracks the Euribor rate. This means that you will reap the benefits of low Euribor rates – and if they fall, the reference rate on your loan will decrease too.
You will be safe in the knowledge that the reference rate on your loan will not exceed the agreed level – so even if general interest rates were to rise, your interest rate will stop at the cap.
The monthly payment on a housing loan is typically the largest individual expense in a household. An interest rate cap helps keep the monthly payment under control.
If your loan has an interest rate cap, you can flexibly change your loan’s repayment schedule. This means that you can add instalment-free months to your loan, for example.
Add an interest rate cap to your loan to set a maximum level for the reference rate during the validity of the interest rate cap.
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