Moneyfacts suggests capped rates, which never rise higher than a set level, are on average 0.50 basis points higher than the equivalent variable rate deal, although still cheaper than the average fixed rate.
The statistics firm warned that as interest rates are being pushed further out, borrowers are unlikely to ever hit the cap and so better off opting for a variable rate deal.
Michelle Slade at Moneyfacts, said: “Recent figures show the UK economy is not recovering as well as the Monetary Policy Committee would like and bank base rate is predicted to remain at its current level until next year, when it is only expected to rise very slowly.
“Borrowers opting for the variable rate deal from ING Direct at 1.90% would have to see rates rising by more than 2.49% – an increase that is highly unlikely – during the two year period for the capped deal to be a better option.”
Borrowers fearful of rates rising would be better off with a fixed rate mortgage, she said.
“If borrowers are concerned about the effect of rising rates on their mortgage repayments then the security of a fixed rate deal represents a better option.”
Lenders including Coventry Building Society, First Direct, The Mortgage Works and Woolwich from Barclays offer capped mortgages.
Mike Fitzgerald, sales director, The Emba Group, said trackers appeal to people who understand interest rates won’t rise imminently but the bigger global economic picture is making people cautious.
“The Coalition could fall apart at any point, alongside the debt issues in the US and Eurozone. If you start to see rates going up, at least you know you’ve got a ceiling on your mortgage. If you’re already on a sub-2% tracker rate, great stuff, but I do think we’ll see a lot more capped rates from lenders,” he said.
