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Dogfight as the fur flies

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

the Treasury.

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

or risk-free.”

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.”

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