Interest rate cap
With an interest rate cap, you can limit your loan’s interest expenses for years ahead.An interest rate cap will help you to keep your loan interest costs under control, even if interest rates rise
You can set a maximum limit for your loan’s reference interest rate for up to 14 years, to secure your finances if interest rates rise.
Interest rate cap sets a maximum for your loan’s reference interest rate but you will also benefit from falling interest rates
With an interest rate cap, you can set a maximum reference interest rate, but you will also benefit from low rates if the reference rate is below the maximum you set.
If you have an interest rate cap, your loan repayment plan can adapt if your situation changes
You can agree on changes to the loan repayment plan and even pay the loan off ahead of schedule. Your interest rate cap will then end, without extra charges.
An interest rate cap will protect you from rising interest rates, bringing peace of mind
You can set an upper limit for your loan’s reference interest rate, which will not be exceeded while the interest rate cap is valid.
You can purchase an interest rate cap for a new or old loan, for the period of your choice: 5, 7, 10 or even 14 years. An interest rate cap is interest rate protection suitable for a home loan or other Euriborbased loans. You can also agree on an interest rate cap for a bank loan.
How does the interest rate cap work in practice?
A maximum reference rate is set for a floating rate loan, for an agreed period. The reference interest rate may change depending on market conditions, but it will not rise above the maximum you set. When the reference rate is lower than the maximum rate you chose, you will still benefit from lower interest rates.
The protection period of the interest rate cap may be shorter than your remaining loan term. When the interest rate cap ends, changes in the reference interest rate will affect the interest expenses of your loan as normal.
How an interest rate cap works based on different repayment methods
An interest rate cap can be set for loans with different repayment methods. The cap sets an upper limit on rises in the reference rate in all cases, but the effect of rate rises on instalments or the loan term varies.
Variable annuity  Equal amortisation  Equal payment  

Instalment


Repayment of loan principal


Loan term


The effect of the interest rate cap when interest rates rise

Limits the growth of interest rates  Limits the growth of interest rates  Limits the extension of the loan term 
Variable annuity
The loan term remains the same. The size of instalment could change even if the loan were protected with an interest rate cap. The benefit of an interest rate cap in this repayment method is that it will help you to keep your interest costs under control. The loan is paid back within the planned schedule. The instalment may also decrease if interest rates fall.
Equal amortisation
The loan term and repayment of the loan principal remain the same. The size of instalment could change even if the loan were protected with an interest rate cap. The benefit of an interest rate cap in this repayment method is that it will help you to keep your interest costs under control. Also, a maximum instalment can be set for the cap’s period of validity. The loan is amortised as planned, and the loan term is not prolonged.
Equal payment
The size of instalment remains the same. The loan term could change even if the loan were protected with an interest rate cap. The benefit of an interest rate cap in this repayment method is that it will help to prevent your loan term getting longer if interest rates rise. The size of instalment remains the same even if interest rates rose, meaning that your monthly costs will stay the same.
We’ll help you to choose interest rate protection that suits you
The protection level and period of the interest rate cap can adapt to your needs. An expert at your bank will help you to choose a suitable interest rate cap, based on criteria such as these:
 The reference interest rate ceiling as a percentage.
 The protection period, which can be 5, 7, 10 or 14 years.
 Will the cap limit the reference rate rise for all of the loan or, for example, just half of it?
 Will you pay the interest rate protection fee in one instalment (premium), or monthly as part of the loan margin during the cap’s period of validity?
Frequently asked questions
If you’re worried about interest rate rises, feel free to contact your OP cooperative bank. Together, we’ll map out your situation and wishes. On this basis, we’ll find a suitable solution to ensure that there’s no need to worry about future changes in interest rates.
An interest rate cap will limit your loan’s interest rate costs for the agreed period, and ensure that you can continue repaying the loan principal, even if rates rise.
An interest rate cap is suitable for you if you want to keep your loan’s interest rate risk within certain bounds, but can cope with moderate changes in loan servicing costs.
Other types of protection include a fixed interest rate (for the entire loan term) and a fixed interest period (for an agreed part of the loan term).
A fixed interest rate solution is right for you if you value certainty about the size of regular loan payments and would like to eliminate the loan’s interest rate risk.
You can buy an interest rate cap for a new or old loan. An interest rate cap is worth buying if you want to be certain about your loan’s future interest rate costs. So now is always the right time to get protection.
You can purchase an interest rate cap later, for an existing loan, as long as the remaining loan term is at least as long as your chosen protection period.
To get an interest rate cap for your loan, please contact your OP cooperative bank.
The price is based on the chosen protection period and the level of the interest rate cap. It is also affected by market conditions at the time and interest rate forecasts.
An interest rate cap offer is always approximate – the final price will be affected by market conditions and interest rate forecasts. The final level, duration and price are determined when the agreement is made.
You can pay for the interest rate cap with a single payment (premium) at the time of purchase (interest rate cap with single premium), or monthly as part of the loan margin during the interest rate protection period (interest rate cap premium as part of loan margin):
Paying the interest rate cap price as part of the loan margin
Paying for the interest rate cap as part of the loan margin means that the cap fee is included in your regular loan payments. Payments (premiums) for the cap are included in the total interest paid on the loan during the cap’s period of validity. This kind of interest rate cap cannot be cancelled early if the loan is still valid. However, if a loan protected with an interest rate cap is paid off early, the interest rate cap will end and no separate fee will be charged for this.
Paying the interest rate cap price with a single payment (premium)
In this case, the interest rate cap fee is paid in a single payment at the time of purchase. A cap paid for in this way can be ended early, at any time. You can also pay the loan off early, before the interest rate cap ends. If you do this, the interest rate cap will end and the bank will return part of the cap fee, calculated on the basis of the unpaid loan principal and unused protection period. The amount repaid depends on the market price at the time and the size of the original interest rate cap fee.
A loan protected by an interest rate cap is a floatingrate loan with a referencerate upper limit set for an agreed period. For an interest rate cap to be paid as part of your loan margin, the additional margin charged takes effect immediately.
If you purchase an interest rate cap for a new loan, the reference rate’s upper limit takes effect upon drawdown of the loan, when the first reference rate value is set.
If you purchase an interest rate cap for an existing loan and pay the cap as part of your loan margin, the upper limit takes effect on the agreement day.
If you purchase an interest rate cap for an existing loan and pay the cap with a single payment, the upper limit takes effect on the first interest rate adjustment date after the cap is purchased.
An old interest rate cap can be cancelled if you have paid a singlepayment fee (premium) upon making the agreement. You can then agree new interest rate protection, if you wish.
If you pay the interest rate cap price in instalments, as part of the loan margin, you can change the protection period or the cap’s level at any time during the cap’s period of validity. Cap premiums charged as part of the margin could rise or fall, depending on market conditions and the cap’s protection period and level.
When a loan has an interest rate cap paid in instalments, the total interest includes the:
 Loan margin
 Additional margin on the interest rate cap
 Reference rate or interest rate cap level, depending on which is lowest
When a loan has an interest rate cap with a singlepayment premium, the total interest includes the:
 Loan margin
 Reference rate or interest rate cap level, depending on which is lowest
Regular loan payments are based on the total interest rate, repayment of the loan principal, and expenses. The interest period ends on the interest rate adjustment date. If the reference interest rate has risen or fallen since the previous interest rate adjustment, your regular loan payments or loan term may change, depending on your repayment method.
However, the reference rate on a loan protected by an interest rate cap will not rise higher than the upper limit chosen on the interest rate adjustment date. In such a case, the interest rate cap will limit the rise in interest expenses. Depending on the repayment method, the regular loan payment can also decrease on the interest rate adjustment date. This means that you will benefit from lower interest rates.
If your repayment method is variable annuity, your monthly instalment may change when the general interest rates change. This is because the proportion of the repayment of the instalment may also increase so that your loan term remains the same.
So, the change in the instalment is related to your repayment method, meaning that the instalment may increase on the interest rate adjustment date even if your loan has an interest rate cap. However, the instalment of the loan with an interest rate cap does not increase by as much as without the interest rate cap because the interest rate cap limits the rise in interest charges. Your instalment may also decrease if the general interest rates decrease to the level lower than the interest rate cap.
When the instalment amount is calculated again on the interest rate adjustment date, the time after the interest rate protection is also taken into account in the calculation of the proportion of the repayment. In the calculation, the reference interest rate at that time is assumed to correspond to the interest rate level on the interest rate adjustment date.
The advantage of the interest rate cap in the variable annuity loan is that the interest rate cap limits the proportion of interest charges of your instalment. In addition, the loan is paid back within the agreed schedule.
The interest rate cap is granted by an OP cooperative bank.