FISCUS FINANCE - ONLINE FINANCIAL INFORMATION AND ADVICE

CAT Standards for Mortgages

CAT refers to Charges, Access and Terms. The government introduced the CAT standard for mortgages to help mortgage lenders structure their products to ensure information provided to UK consumers is straightforward, fair, and easy to understand.

It must be made absolutely clear that the CAT standard is not a legally binding “gold standard”. Neither is it a government guarantee of the quality of the product. The CAT standard simply means that any particular CAT mortgage contains certain features within the product.

Many mortgage brokers and experts would argue that the CAT standard is not particularly relevant or necessary these days. Many high-street banks and lenders offer non-CAT mortgages that may lack certain features of the standard, but are priced at a lower interest rate or offer other features and benefits. This means that if a mortgage is not a CAT standard, it is not necessarily a ‘bad’ product, but is an alternative financial package.

The official HM Treasury information on CAT mortgages states that they "...do not carry a government endorsement or guarantee, are not guaranteed to suit every borrower and may not be the best deal available..."

FEATURES OF A CAT STANDARD MORTGAGE

There are two sets of CAT standards; one for a loan charging variable interest rates and one for a fixed interest mortgage or subject to an upper limit (capped).

Essential features shared by both CAT standards are summarised below:

• All marketing and paperwork must be easy-to-understand, clear and fair.

• You do not have to purchase associated or ‘linked’ products when acquiring a CAT standard mortgage.

• If your lender decides that they can no longer offer you CAT standard terms, they must provide you with a minimum of 6 months notice before any changes are made.

• If you are in arrears, interest should only be paid on the outstanding debt at the standard rate.

• Interest on a CAT products must be calculated daily.

• When payments are made, the account is credited in full.

• There can be no separate charges for a mortgage indemnity guarantee (MIG).

• Any other fees must be disclosed up front.

• Borrowers pay no fees to brokers.

FEATURES SPECIFIC TO VARIABLE RATE CAT MORTGAGES

• No arrangement fee.

• The interest rate can be no more than 2% above the Bank of England base ‘repo’ rate.

• When the Bank’s base rate falls, interest rates must adjust to reflect the change within a calendar month.

• CAT mortgages cannot include redemption charges at any time.

ADDITIONAL CAT STANDARDS FOR FIXED AND CAPPED MORTGAGES

• There is a maximum booking fee, set at £150.

• The maximum redemption charge must be no more that 1% of the amount you owe for each remaining year of the fixed period, and this figure must include monthly reductions in the amount borrowed. There can be no redemption charge after the fixed or capped rate period.

• No redemption charge applicable if you remain with the same mortgage lender when you move home.

If you would be interested in applying for a CAT Standard product, then please complete our mortgage enquiry form and we shall have an Independent Financial Adviser (IFA) contact you within the next 24 hours. We also recommend that you take a look at our CAT Standard Mortgage Tables, which provides comparision information on the best CAT mortgages and is a useful tool to provide you with competitive interest rates.