CAT standards have been introduced to try and ensure that
certain financial products meet universal standards of quality.
To receive a CAT mark, a mortgage product must meet a variety
of criteria. There are a number of requirements that are
common to all types of mortgage product, while others are
relevant only to variable rate mortgages or those with introductory
offer periods:
Requirements for all mortgages in order to receive a
CAT mark
The offer must be available to existing and new customers.
Many mortgages with introductory offers are only available
to new customers. These will therefore be precluded from
gaining a CAT mark.
The minimum loan amount is capped at £10,000. In other
words, any mortgage that requires you to borrow any more
than this sum will not be awarded the standard.
Mandatory product purchases are not permitted. A lender
cannot insist you purchase their buildings insurance, income
protection products or anything else that is sometimes sold
in conjunction with a mortgage.
The interest rate on the product must never be more than
2% above the bank base rate.
Interest must be calculated daily as opposed to monthly
or yearly. To find out the benefits of this click here.
The customer must be permitted to make early repayments
without penalty.
There must be no separate charge for Mortgage Indemnity
Guarantee premiums. Any additional cost arising from this
must be incorporated into interest rate.
Other fees must be explained in cash terms each year
- this includes redemption penalties. This cannot therefore
be expressed as a percentage of the loan amount or an amount
of interest equal to that charged over a period of time.
- Borrowers must not be forced to pay fees to brokers.
Three months notice must be given of any changes in the
fee and charging structure. - If you fall into arrears,
you cannot be charged a higher rate of interest as a penalty
for at least three months.
The mortgage must be portable if the customer moves house
- even within the discount period if there is one. This
means you can continue paying the same mortgage and will
not incur any redemption penalties.
The customer must be able to freely switch to another
CAT mortgage provided by the same lender at any time.
Specific to variable rate mortgages (including tracker
mortgages)
There can be no redemption penalties whatsoever.
Rates must change within one month of an alteration to
the Bank of England base rate.
There can be no arrangement fees.
Specific to other types of mortgage
There cannot be any extended redemption penalties. In
other words, if there is a discount or capped period connected
to the mortgage, any redemption penalties cannot extend
beyond that period of time.
There is a cap on the size of any early redemption penalties
within that period.
