A week after the Treasury announced its Cat-standard mortgage policy, the
Opposition parties remain unconvinced they will accomplish anything towards
cleaning up the scandal-plagued industry.
Both the Conservatives and the Liberal Democrats have expressed fears
about the Cat initiative.
The Tories believe that Cat products are far too narrow in scope and not
likely to appeal to many prospective buyers.
Shadow Treasury economic secretary Howard Flight says unless brokers are
allowed to charge for selling Cat products they will be unlikely to advise
on them and the initiative will be a failure.
He says they are unlikely to combat the areas of potential abuse and scams
that exist in the mortgage industry.
Like Flight, Liberal Democrat finance spokesman Vincent Cable is concerned
that the Government is misleading the public into thinking they are
sponsoring or recommending the products, which was never the intention of
Cable says that as brokers are currently not allowed to charge fees, this
mistaken view will be compounded. Like Flight, he remains unconvinced that
the product will be very popular.
For its part, the Council of Mortgage Lenders is taking a wait-and-see
attitude on Cat mortgages.
Director general Michael Coogan says they will serve as a useful
additional option for borrowers to consider but he questions whether they
will be the cheapest product on the market, and wonders if in the end
consumers will choose the simplest or the most inexpensive mortgage rather
than the Cat.
The trade body is now awaiting a decision on how the FSA will regulate
disclosure of product information.
There are two strains of thought on this matter. The first involves
comparing products with the Cat benchmark or, as the CML advocates,
highlighting the financial costs and key features of a product, only one of
which being whether it is Cat-compatible or not.
Coogan says: “We have emphasised all along that consumers should not
assume that just because a product is Cat standard it means that it is safe
Flight says: “As it stands right now, brokers will be cut out of the
picture. The Government must permit brokers to charge fees for involving
themselves in Cat mortgages.
Cable says “I hope this not the Government avoiding confronting the issues
of mortgage regulation. This could produce something of a backlash.”