What is a CAT Standard mortgage?

A CAT Standard mortgage is a mortgage that meets a number of government standards relating to charges, access and terms. CAT standard mortgages were launched in 2000 ad were designed to motivate financial organizations to offer easy to work out financial products that are just and fulfill the minimum standards stipulated by the government.

According to the government the reason that CAT mortgages exist are to prevent the use of misleading marketing and the introduction of any hidden charges.

CAT standards do not actually pertain to all of the different mortgage types, they are actually voluntary and not obligatory, and if a mortgage is not CAT standard this does not necessarily mean that is any less commercially viable.

There are two different types of CAT Standard Mortgages:

The first is a variable interest rate mortgage
The second is a fixed or capped interest rate which normally is limited to a fixed period at the beginning of the mortgage term
There are basic regulations for CAT Standard Mortgages:

Calculation of interest is carried out on a daily basis
Mortgage Indemnity Guarantee -MIG has no additional charge
Brokers do not request a fee
Any written specifications and instructions must be comprehensible and straightforward
It is crucial that a lender must adhere to the normal standards required for working out the amount that can be loaned
There is no set period for any further repayments to be made, this can be undertaken at whatever time.
Choice of which day of the month regular payments are to be made must be available
If agreement is specified by the lender, a CAT Standard Mortgage can be transferred when moving residence
If a CAT Standard Mortgage is to be cancelled then the lender must give 6 months notice of their intentions
The borrower is under no commitment to make use of other financial products the lender may have on offer
Should a borrower become in arrears then the lender should charge interest only, at the usual rate, to be paid on the owing debt
Further Regulations for CAT Standard Variable Rate:

• The interest rate must be not exceed 2 percent over the Bank of England base rate

• If the base rate falls then the interest rate must be reduced within one month of this fall

• Arrangement fees should not be charged

• Redemption fees should not be charged

Further Rules for CAT Standard Fixed or Capped Rate:

• 1 percent of the amount due for each remaining year of the fixed term is the maximum redemption levy, decreasing monthly

• Once the fixed or capped rate period has terminated there will be no redemption charge payable

• Presently the maximum arrangement charge is £150

• If the borrower remains with the same lender when moving home then there will be no redemption charge payable

Do not think that CAT Standard Mortgages are a solution or remedy as they do not support an iota of government guarantee. Not every borrower will benefit from CAT Standard Mortgages as they may not present the best choice with regard to monthly repayments or charges.

CAT Standard Mortgages are clear; they are optional for mortgage providers and the individual lender has to make their own decision as to whether to proffer CAT Standard Mortgages.

Should a lender decide to offer CAT Standard Mortgages then it will be apparent from the related promotional information. A lender will realize that it is practical to offer CAT Standard Mortgages as it makes good trading logic.

A lender must when deciding to make available CAT Standard Mortgages, to provide them with equivalent terms for both existing and new customers.

A CAT Standard Mortgage does not stipulate any regulations concerning salary elements in working out the amount that might be borrowed, neither will it ask for a minimum prepayment amount to be given by the borrower. A mortgage provider must decide whether to implement these business options.

Any customer currently with a mortgage provider has the right to re-mortgage to a CAT Standard Mortgage assuming they conform to all the requirements connected to the property’s value and their means to meet repayments. A lender can stipulate what the minimum amount of the loan can be.

Existing customers are entitled to re-mortgage to a CAT Standard Mortgage, provided that they meet all criteria relating to the value of the property and the ability to make repayments, lenders are permitted to define the minimum amount a loan can be. This currently for a CAT Standard Mortgage must not be larger than £10,000 and the lender having the freedom to stipulate its maximum value.

Restrictions of Voluntary Scheme for CAT Standard Mortgages

As we have stated before CAT Standard Mortgages are voluntary for mortgage lenders and they are under no responsibility to offer CAT Standard Mortgages to every single borrower. It is of the utmost importance that the lenders opinion with regards to the aptness of the borrower to met repayments and if the property is acceptable is adhered to. It is not allowed to randomly select a group of borrowers to receive CAT Standard Mortgages, it has to be available to every applicant.

Providers of CAT Standard Mortgages



Whilst a number of mortgage lenders talk about CAT Standard Mortgages few are promoting them as such. Alternatively some mortgage providers seem to be including the CAT Standard regulations so as to encourage their ordinary mortgage merchandise, while possibly not representing truthfully and in detail the CAT Standard.



Some mortgage providers have launched Tracker mortgages as a substitute to standard variable mortgages. Typically a Tracker mortgage could be given at 1% above the Bank of England base rate. This means that should the base rate rise then there would be a correlation in the Tracker rate. Of course should the base rate fall then a correlating decrease in the Tracker rate would be implemented. Some financial organizations give a more varied field of fixed rate mortgages than before. Fixed or capped rate arrangements covering 2, 3 or 5 year periods are offered by numerous lenders.

Expanding Rivalry in the Mortgage Market


Borrowers have found that re-mortgaging their homes and moving to other lenders is advantageous and therefore mortgage lenders have taken to increasing penalties on borrowers when they chose to repay their mortgage loans before full term. This specific strategy is against the CAT Standard regulations. Unfortunately mortgage lenders have had to follow this line of behaviour due to a worry that they might not be able to keep borrowers sufficiently long to make a respectable yield from any mortgage products they offer.

What were the reasons for introducing the CAT Standard

CAT stands for Charges, Access and Terms. Standard was first launched for Individual Savings Accounts better known as ISAs in 1998 by the government.

The government aimed to motivate financial organizations to give customers a choice of ISAs, incorporating basic fees, with simple access to financial resources and easy to understand terms. 



It was so popular with the public that the government decided to enlarge the program to the housing market and this was done in 2000 by putting into operation the CAT Standard for mortgages.
 In due course the CAT Standard for nearly all savings and investment commodities was substituted by the government’s range of stakeholder pensions and savings accounts in 2005.
It has continued to exist as it was not actually suitable to the government’s stakeholder concept. 



CAT Standard Mortgages and where they are heading

Due to the fact that the CAT Standard rules are voluntary, financial organizations are not urged by the government to encourage CAT Standard Mortgages. Currently in the zealous mortgage market, the majority of lenders choose mortgage products that do not stick precisely to the CAT Standard. However a number of products comprise sections obtained from the CAT Standard rules.

The governments outlook on this condition relies mostly on its attitude. If politicians become aware that voters are happy with the prevailing mortgage market, then the chances of change in the short-term is unlikely. but should the consumer begin to convey emotions of dissatisfaction with the mortgage lenders it might be necessary for government ministers to introduce legislation, which could include ‘beefing up’ the CAT Standard rules, in order to introduce additional protection into the mortgage market. Should there be a chance that extra regulations would be introduced then mortgage lenders might begin to promote CAT Standard Mortgages so as to steer clear of stringent regulatory authority.

To find out more about CAT standard mortgage feel free to fill in the quick contact form now to speak to a third party adviser, alternatively if you wish to see different rates at which you can take out a mortgage loan online then get a quick online quote or alternatively use our mortgage calculator tool to find out what mortgage is right for you and to find out if you qualify for a mortgage at the rate that you want.