On closer inspection, the CAT standards really do seem
to be lacking the cutting edge to make a real impact on
the mortgage market. Here are eight reasons why the CAT
standards are flawed:
The whole system is voluntary. Many critics claim that
a set of standards should be brought out which that all
mortgages should meet. Several leading lenders have already
announced that they have no intention of launching CAT mortgages.
The standards are not hard hitting enough. They address
too many issues but solve few of them.
The limit on rates of 2% above the Bank of England base
rate is set too high. It would have been in the consumer's
interest if this had been set lower.
The very cheapest deals will not carry a CAT mark, as
lenders cannot afford to make them available to existing
customers. Special introductory offers are used to attract
business and can be loss making in the short term - it is
therefore financially unviable to make these available to
everyone. The result is that CAT mark deals will be more
expensive.
As they are among the most profitable products, tied
agents working on behalf of the lenders may promote them
at the expense of more suitable less profitable products.
There are many great mortgages that meet most of the
criteria, but not all of them. In a lot of cases these will
be far more suitable than a CAT marked mortgage that meets
the criteria but is not nearly as competitive.
Advisers are banned from receiving fees for recommending
CAT marked mortgages. This is a huge disincentive for them
to recommend CAT products even if they happen to be the
most suitable product for a customer.
The treasury has repeatedly insisted that the CAT mark
does not mean the mortgage has been given an official stamp
of approval or endorsement by the government. Some would
argue that this is exactly what the standard should mean.
What on earth is the use of the CAT mark if it really gives
you no guarantee of product quality?
