Cat Standard Mortgages

When and Why Was the CAT Standard Introduced

The CAT (Charges, Access and Terms) Standard was first introduced for ISAs (Individual Savings Accounts) by the government, in 1998. The government’s intention was to encourage financial institutions to offer customers a choice of ISAs with a low level of charges, easy access to funds and clear, unambiguous terms.

The resulting financial products were so popular with the investing public that the government was encouraged to extend the scheme to the housing market by introducing a CAT Standard for mortgages, in 2000.

Subsequently, in 2005, the CAT Standard for most savings and investment products was replaced by the government’s portfolio of stakeholder pensions and savings accounts. The CAT Standard for mortgages has remained in place because it did not really fit comfortably into the government’s stakeholder framework.

Where are CAT Standard Mortgages Going
Because of the voluntary nature of the CAT Standard rules, financial institutions are not compelled by the government to promote CAT Standard Mortgages, actively. In the current competitive mortgage market, most lenders are choosing to offer mortgage products that do not adhere exactly to the CAT Standard, although many of these products include elements derived from the CAT Standard rules.

How this situation develops will depend largely on the attitude of the government. If politicians perceive that voters are content with the current mortgage market, then little is likely to change in the short-term.

However, if consumers start to express feelings of disgruntlement with the mortgage providers, government ministers may be tempted to introduce legislation, which could include ‘beefing up’ the CAT Standard rules, in order to introduce further safeguards into the mortgage market. Even the possibility of further legislation being introduced might encourage mortgage providers to start promoting CAT Standard Mortgages once again, in order to avoid a harsher regulatory regime.