Capped rate is an interest rate that is allowed to fluctuate, but which cannot surpass a stated interest cap per cent.

It saves the borrower from paying a higher interest amount which he otherwise would have to if the rate of interest rises. People can acquire home loans on capped rates.

Capped rates provide the borrower with a hybrid of a fixed and variable rate loan. The fixed part comes from the capped rate itself, while the variable part comes from the loan's ability to move up or down with market fluctuations.