John Charcol has launched The Interest Rate Protector, an interest rate cap that protects borrowers with large mortgages from rising rates.
Borrowers buy protection and set the term length and rate, giving them a chance to insure themselves against the likelihood of a rate rise.
The cap is offered to variable rate borrowers as an alternative to a fixed rate for those borrowers who either can't or don't choose to fix their mortgage loans.
Charcol's senior technical manager, Ray Boulger says: "Unless you are the proud owner of a crystal ball, knowing what the future for interest rates looks like is all but impossible. What we do know however is that we are in challenging times with plenty of known unknowns.
"With many borrowers currently enjoying the benefits of an ultra low interest rate environment, those on a variable rate risk some tough times ahead when rates, as they simply have to at some stage, rise."
Boulger said the product offers a good alternative to a fixed rate for borrowers on some of the lowest market Standard Variable Rates (SVRs), unwilling to pay more, including those on the 2.5% rate of Nationwide, Cheltenham & Gloucester, Lloyds TSB and Intelligent Finance.
Charcol is also targeting borrowers with low levels of equity who are struggling to remortgage and buy-to-let landlords in a similar situation, as a result of high gearing and/or an inadequate rental income to meet lenders' current criteria.
SVRs have already risen, so for borrowers who are paying a low rate on a lifetime tracker or fixed rate, when the deal finishes the SVR rate will jump, said Charcol.
Boulger said the cap is unlikely to be cost-effective beyond three years, but it offers a tailored insurance policy borrowers can set to their own level against payment shock.
The minimum cover on offer is £500,000 and the cost falls for the cap as the loan size increases. For example, a five year cap to cover a £500,000 mortgage currently costs approximately £16,500 to cover a 3% Bank Rate, £13,500 for a cap at 4% and £11,500 for a cap at 5%. Cover for a £1m mortgage would be approximately £28,000, £22,000 and £18,000 respectively.
If Bank Rate rises above the chosen level, borrowers receive monthly payments to cover the difference until the end of the insured term or the rate falls.
For example, Boulger said anyone who took out an interest only tracker mortgage 2 years ago when Bank Rate was at 5% would have made a sufficient saving on the cost of their mortgage over the last 9 months to pay the total cost of a Bank Rate cap at 3% for 5 years.
"On the same basis it would have taken just over 6 months of the lower mortgage payments to cover the cost of a cap at 5%," he said.
Charcol said buying a cap could have tax implications, so advice should be sought.
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