Ifan has a £150,000 interest-only mortgage at the lender's SVR minus 1%, capped at 5.5%. The SVR rises from 6% to 7%. What is his monthly payment after the rise?
Before: 6% − 1% = 5%, so £625.00. After: 7% − 1% = 6%, but the cap limits the rate to 5.5%: £150,000 × 5.5% ÷ 12 = £687.50 (Walbrook CeMAP specification v14, MRT2 AC6.2). £750.00 ignores the cap (6%), £625.00 is the old payment, and £875.00 charges the full SVR of 7%.
Ignoring the cap once the underlying rate goes above it.
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