Cap (variable rate ceiling)
The cap is the legal ceiling limiting how far a Belgian variable mortgage rate can rise above its initial level. It makes the worst-case scenario calculable at signature, which distinguishes the Belgian market from several neighbouring countries where variation is unlimited. It is stated in the credit offer.
How to use it when deciding
The cap is stated in the credit offer. It expresses the maximum upward movement, in points, that your rate can make away from its starting level over the whole life of the loan.
The question to put to the lender is therefore simple: what would my monthly payment be if the rate reached its maximum? That figure is calculable, and the lender must be able to produce it.
If that maximum payment stays within your budget, a variable rate becomes a rational trade-off. If it would put you in difficulty, a fixed rate is the answer regardless of how attractive the starting rate looks.
Frequently asked questions
Is a cap compulsory in Belgium?
Belgian mortgage credit legislation requires variable rates to be capped, and the ceiling must appear in the credit offer given to the borrower before signature. This is a structural feature of the Belgian market rather than a commercial option.
Does a cap also protect me on the way down?
The mechanism is generally symmetrical, with variation framed in both directions relative to the initial rate. The exact terms are set out in the particular conditions of your own contract, which is where you should check them.