Spotlight On: First Direct's capped tracker mortgage

The deal

First Direct has launched a three-year Limited Edition Capped Tracker mortgage.

The good points

The loan tracks the Bank of England base rate plus 2.18 per cent and starts at 2.68 per cent with a promise not to go higher than 3.98 per cent over the next three years, even if the base rate climbs more than 1.3 per cent. The higher rate is cheaper than the average three-year fixed mortgage at 4.92 per cent.

The bad points

You'll need a 35 per cent deposit to get the deal. There is a 3.08 per cent rate, which won't go higher than 4.38 per cent in the next three years, but you'll still need a 25 per cent deposit. The booking fee is also pretty hefty at £999 and is charged for every £400,000 you borrow. So a £450,000 loan would attract a fee of £1,998.

Conclusion

The online bank says the deal is in response to borrower uncertainty about interest rate rises and their impact on monthly payments. If you are worried about that, then this could work out cheaper than many traditional fixed-rate deals, but you'll need to look closely at fees to compare the total cost.