What ia a Cat Standard Mortgage ?
A CAT standard mortgage is one that meets a number of government defined standards relating to 'Charges, 'Access and 'Terms.
According to the Treasury, the objective of CAT standards is to 'prevent confusing marketing and hidden charges'. The Government is seeking to set out basic and transparent conditions for mortgage products.
CAT standards don't apply to all mortgages. They are voluntary, so mortgage lenders don't have to use them yet.
The literature or other information you get about a particular mortgage will say whether it's a CAT-standard or not. If you take out a CAT-standard mortgage, you can be confident that it has no nasty surprises hidden in the small print and that the terms won't suddenly change for the worse.
Mortgages that are not CAT-standard are not necessarily bad buys. They may offer features that will interest some people, such as a highly attractive interest rate, but are accompanied by charges or penalties that do not meet the CAT standard.
Remember - the CAT standard:
- This does not mean the government guarantees the mortgage.
- This does not mean the government recommends or endorses the mortgage.
- This does not mean the mortgage is necessarily suitable for you.
- This does not mean the mortgage is the best deal available.
Below is a summary of the CAT Mortgage Standards relating to variable, fixed, discount, cash back and capped rate mortgages.
Charges- Interest must be calculated daily.
- Every regular payment and overpayment you make must be credited immediately.
- You may not be charged separately for a mortgage indemnity guarantee.
- All fees must be disclosed in cash up front before you take out the loan.
- A mortgage broker arranging a CAT-standard mortgage for you may not charge a fee.
Variable rate loans
- There must be no arrangement fee.
- The interest rate may be no more than 2 per cent above the Bank of England base rate.
- When the base rate falls, your mortgage payments must be adjusted within one calendar month.
- You must be able to pay off part or all of the mortgage at any time without penalty.
Fixed and capped rate loans
- The maximum booking fee arrangement fee is £150.00.
- The maximum redemption charge is 1 per cent of the amount you owe for each year of the fixed period, reducing monthly.
- There must be no redemption charge once the fixed-rate or capped period has come to an end.
- There must be no redemption charge if you stay with the same mortgage lender when you move home.
Access
- If there is a minimum amount you must borrow, this must be no more than £10,000
- Any customer may apply for the mortgage.
- The lender's normal lending criteria must apply - there can be no special selection rules.
- Provided the lender is happy to lend against the new property, you can continue with your CAT-standard mortgage when you move home.
- If you make regular payments, you can choose which day of the month to pay them.
- You can make early repayments at any time.
Terms
- All advertising and paperwork must be straightforward, clear and fair.
- You do not have to buy any other product to get a CAT-standard mortgage.
- You must be given at least six months' notice if your lender can no longer offer you a mortgage on CAT-standard terms.
- If you fall into arrears, you should pay interest only on the outstanding debt at the normal rate.
