Few lenders have come onto the market with CAT-standard mortgages, despite the Government heralding them as a fair and clear alternative.
Only Coventry, Direct Line, Yorkshire BS, Hinckley & Rugby and egg have launched CAT- standard mortgages, while Cheltenham & Gloucester has dropped the application fee on its flexible mortgage to comply. But nothing has as yet emerged from the UK’s largest lenders, Nationwide and Halifax.
Halifax said that it is planning to launch a qualifying product when it crosses over to daily interest calculation in June. But Celia Rowland, spokeswoman at the Halifax, said that it is not expecting the product to transform the market.
“We see the CAT-standard mortgage as a benchmark. They will not offer the cheapest rates and the market will always be led on rate, especially with good deals available that contain some CAT features, for example no redemption or arrangement fees or compulsory insurances,” she said.
Steve Blore, media relations manager at Nationwide, said that it was not racing to launch.
He said: “We are looking at the possibility of a CAT-marked product but have no plans for now. We are assessing whether it is actually what customers want. There are a lot of attractive mortgages on the market that are not CAT standard.”
Specialist lenders are not rushing to launch CAT- marked products either. Ian Giles, director of marketing at First Active, said it has been in talks with brokers to try and ascertain whether there is any real demand for this type of product.
He said: “We have concluded that there is not much rationale for a launch as we think our product is more superior than a CAT-standard product – the only place it does not meet the requirements is on the minimum loan size. Our minimum loan size is £25,000 and if it fell any lower, in administration terms it would become non-profitable.”
Ray Boulger, senior technical manager at John Charcol, said that a lender’s attitude to launching CAT-standard mortgages will ultimately depend on where its business comes from.
He said: “Lenders that source business direct will have a different agenda to lenders that do business through intermediaries as they need to offer competitive mortgages otherwise the intermediary will not recommend it.”
He also questioned the value of some of the products that have already come onto the market. For example, Yorkshire BS has launched a CAT-marked mortgage which sits in a range of flexible products that all offer better value.
“One product is fixed at 5.99% for a year, one has 3% discount for four months, another has two months’ free interest while the final one offers free fees on all remortgages. The only benefit on the CAT standard is that it is available for loans below £10,000,” he said.