Mortgages Guide | Mortgage Help Product Information

TheMoveChannel.com | CAT Marks - Cat Standards

Introduction

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.
  • Arrangement fees must be less than £150.