A method of forming a hybrid oxide capping layer (HOCL) is disclosed and used in a magnetic tunnel junction to enhance thermal stability and perpendicular magnetic anisotropy in an adjoining free layer. The HOCL has a lower interface oxide layer and one or more transition metal oxide layers wherein each of the metal layers selected to form a transition metal oxide has an absolute value of free energy of oxide formation less than that of the metal used to make the interface oxide layer. One or more of the HOCL layers is under oxidized. Oxygen from one or more transition metal oxide layers preferably migrates into the interface oxide layer during annealing to further oxidize the interface oxide. As a result, a less strenuous oxidation step is required to initially oxidize the lower HOCL layer and minimizes oxidative damage to the free layer.