Lenders, panel and loan offer
Capped variable-rate loan: what the clause says, and what the cap does not protect against
Index, frequency, margin, cap: read the variable-rate clause of a mortgage in four lines, and identify what the cap does not protect against.
A capped variable-rate loan is read across four lines of its clause: the reference index, the revision frequency, the lender’s margin and the cap. The cap only protects what it names: if set on the rate, it limits the rate; if set on the instalment, it defers the increase over the term, and therefore over the total cost. The amount to compare with your budget is the worst-case payment, as quantified in the pre-contractual information sheet.
By Sandy MASCART, mandataire d'intermédiaire en opérations de banque et en services de paiement ORIAS 26000541 sous le mandat de CDV PATRIMOINE & ASSURANCE (ORIAS 14005573)
Key points
- A variable-rate clause consists of four elements: the reference index, the revision frequency, the margin and the cap.
- A cap on the instalment does not protect against an increase in the rate: it defers that increase over the term, and therefore over the total cost of the credit.
- The annual percentage rate of a variable-rate loan assumes a constant rate: it describes an assumption, not an actual cost.
- The variable-rate loan is subject to a specific usury threshold, which is sometimes higher than that for long-term fixed-rate loans.
- The pre-contractual information sheet must quantify the worst-case payment; it is this amount, rather than the initial instalment, that you must compare with your budget.
A capped variable-rate mortgage starts lower than a fixed rate, but it must be judged on its clause: index, periodicity, margin, cap. Read these four lines and know what the cap truly protects. The clause is part of the documents that lenders provide to you.
Variable, adjustable, capped: three words for two realities
‘Variable’ and ‘adjustable’: a rate recalculated at scheduled dates. ‘Capped’: a contractual limit, which alone does not specify what is capped.
The two documents the bank must attach to the loan offer
A notice on rate variation, and a simulation of its effect on instalments, term and cost. They are due without request.
The simulation does not bind the lender, but it is the only numerical representation of your clause. Before the loan offer, the European Standardised Information Sheet gives caps, thresholds and the revision formula.
The four lines of the clause, in reading order
The reference index
The external rate to which yours is linked. It must be clear, accessible and verifiable, and the lender must archive its values.
Doubt about a revision? Request the value used in writing.
The revision frequency
Annual, semi-annual or quarterly: the shorter the period, the faster the variation, in both directions. Identify the date of the first revision.
The margin
What the bank adds to the index, fixed for the entire duration. Negotiate it: a low margin is better than a low index at the start.
The cap, and what it covers
It only protects what it covers. On the rate, it limits the rate. On the instalment, it shifts the increase onto the duration, and therefore onto the cost.
- What does it cover?
- Is it symmetrical? A ‘floor’ deprives you of part of the decrease.
- What happens when it is reached? Extended duration, increased instalment or outstanding capital at the end: the information sheet states this.
The quantified worst case: the amount to compare with your budget
The sheet must quantify the worst case: the rate at the contract ceiling or, without a ceiling, the index at its highest over at least the last twenty years. This is its most useful figure.
The annual percentage rate of a variable rate is only a hypothesis
Calcul actuariel par méthode d'équivalence, intérêts composés
Sur un prêt à taux variable, ce calcul suppose un taux constant : le résultat décrit une hypothèse, pas un coût.
- En vigueur depuis le
- Source
- Article R. 314-3 du code de la consommation — Légifrance
Compare two scenarios, original rate and worst case, over the same duration: the instalment formula.
The usury threshold is no more lenient on the variable rate
Moyenne trimestrielle constatée par la Banque de France sur des crédits déjà octroyés. Ce n'est le prix d'aucune offre, et personne ne peut l'obtenir en le demandant.
- En vigueur depuis le
- Source
- Légifrance
Plafond légal opposable à tous les prêteurs sur cette catégorie d'opération. Un plafond, jamais un prix.
- En vigueur depuis le
- Source
- Légifrance
- Intitulé de l'avis Avis du 25 septembre 2026 relatif à l’application des articles L. 314-6 du code de la consommation et L. 313-5-1 du code monétaire et financier concernant l’usure
- Numéro NOR ECOT2625422V
- Date du texte 2026-09-25
- Date de publication 2026-09-26
- Publication au Journal officiel JORF n°0225 du 26 septembre 2026
- Identifiant Légifrance du texte JORFTEXT000054903528
- Identifiant Légifrance de l'article JORFARTI000054903529
C'est cet avis publié au Journal officiel qui a force obligatoire. La Banque de France le reproduit, elle ne le fixe pas.
- En vigueur depuis le
- Source
- Légifrance
Your annual percentage rate of charge must remain below it, insurance included. Fixed? The usury rate.
What the bank must send you of its own accord
Each year, the outstanding capital. Before any change in rate, the new instalments, in writing and free of charge.
Identify the clause that replaces this prior warning with periodic information.
The mixed-rate loan, and why its displayed rate is misleading
Fixed for a few years, then adjustable. Its annual percentage rate of charge is based on the initial period, the cheapest one: compare rather the second example, that of the remainder of the loan.
Who the variable rate suits
A short and known horizon: planned relocation, transitional property, bridge financed by a sale. The test: does the worst case fit within your budget today?
Getting out of a variable rate
Conversion to a fixed rate if the clause provides for it, renegotiation or buyout: the full calculation, the evolution of rates.
The five phrases to find in your loan offer
- The index and its source.
- The periodicity, and the first revision.
- The margin, separated from the index.
- What the cap covers, and what happens when it is reached.
- The payment in the worst-case scenario.
Is one missing? Request it in writing during the cooling-off period.
A variable-rate loan offer? Create your file or have its clause decoded by telephone.
Sources
Read next
- Banks in Lyon: 54 mortgage lenders
- Renegotiating your mortgage or having it refinanced: the calculation that tells you whether it is worthwhile Renegotiating or refinancing your mortgage is only worthwhile if the interest saved exceeds all costs. The method in six lines, and when to abstain.
- When will mortgage rates fall? The state of the market, month by month The ECB, the 10-year OAT, the bank margin: what truly drives rates, the 6- and 12-month scenarios, and the method for deciding between waiting and buying.
- Application rejected due to the usury rate: what the threshold measures and how to bring your rate back below it File blocked by usury? The threshold is compared with the APR, insurance and fees included. Where to find the quarterly rate, and three levers to get under it.
- FISE: the only document that makes two loan offers truly comparable The FISE aligns two loan offers item by item. The reading order that avoids false discrepancies, and the three sections where the price is hidden.
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