CAT Standard Mortgages
A CAT standard mortgage is a property loan that fulfils several standards and requirements outlined by the government, in relation to the charges, access and terms of the loan (CAT). Although only a few mortgage products comply, the official statement of the UK Treasury defines CAT standards as a measure to ‘prevent confusing marketing and hidden charges’ for the benefit of borrowers.
CAT standards remain entirely optional for UK lenders although they are adopted by most and are applied exclusively on a voluntary basis. The idea is that if you take out a CAT standard mortgage, you benefit from having the peace of mind in knowing that you have a loan that complies with the government’s own basic standards and requirements. CAT mortgages are typically free of complex and misleading small print, ensuring borrowers know exactly what they are getting.
This does not necessarily mean that all non-CAT standard mortgages are bad. Nor does it mean that you are guaranteed the best possible deal with a CAT standard mortgage. You may find non-CAT-standard deals available that are significantly more cost-effective than their CAT standard counterparts.
Understanding the CAT Standard
If you’re interested in applying for a CAT standard mortgage, it is important to understand the following before submitting your application:
- CAT standard does not mean that the mortgage is guaranteed by the government
- CAT standard does not represent formal government endorsement or approval
- CAT standard does not guarantee the best possible deal
- CAT standard mortgages are not necessarily the right choice for everyone
As with all mortgages and property loans, it is essential to consider all terms, conditions and borrowing costs before proceeding. CAT standard mortgages may eliminate nasty surprises but to reiterate, they do not guarantee the best possible deal.
Qualifying for CAT Standard
For a mortgage to qualify under the CAT standard guidelines, it must fulfil the following requirements among others:
- Interest is calculated on a daily basis
- Scheduled payments and overpayments are credited instantly
- Mortgage indemnity guarantees must not be charged separately
- All fees and borrowing costs are clearly disclosed in advance
- No brokerage fees are payable on the part of the borrower
Variable rate CAT mortgages
- Arrangement/setup fees are not always payable
- Interest rates must be kept within 2% of the Bank of England base rate
- Early repayment must be allowed albeit sometimes with penalties
- Interest rate adjustments must be made within one month
Fixed and capped rate CAT mortgages
- Redemption charges are capped at a pre-agreed amount during the fixed period
- No redemption charges for borrowers who stay with the same lender when moving home
- No redemption charges when the capped or fixed-rate period ends
- The minimum loan amount should be not less than £10,000
- No restrictions on who can apply
- All standard lending criteria remains unchanged and without additional terms or rules
- The borrower chooses the day of the month to make their repayments
- Early repayments can be made at any time although with additional fees during the fixed period
- The lender’s terms and conditions must be clear, concise and fair
- Additional charges payable if falling into arrears are capped
If you are interested in a fixed or capped CAT standard mortgage and would like to discuss the potential benefits in more detail, we are standing by to take your call. Please contact a member of the team at UK Property Finance anytime for an obligation-free consultation.