This is a mortgage where a rate is
picked and set on the basis that it will reflect the long-term state of interest
rates into the future
The stabilised rate is the amount the client pays, however it is not the amount
that the mortgage is necessarily charged.
The mortgage is still charged the variable rate at that time.
The theory behind this type of scheme is when rates are high the client builds
up a debit balance and when rates reduce that debit balance is repaid. This is
all based on the fact that rates fluctuate constantly and this type of scheme is
supposed to even out those fluctuations.
This scheme is of great benefit as the borrower is not exposed to very extreme
high rates as the low rates are designed to cancel them out the down side is the
stabilised rate is proportionately higher to compensate.