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Treasury&#39s ban on fees putting Cat loans at risk

Lenders, brokers and MPs have accused the Treasury of risking a mortgage


misbuying scandal by banning intermediaries from charging fees on


Cat-standard mortgages.


The Government claims the Cat improves borrower protection but the Council


of Mortgage Lenders is concerned that the take-up of Cat mortgages could be


restricted if brokers do not get a fee for advice.


Opposition MPs are warning that the decision will lead consumers to


believe the Government is effectively underwriting the products.


Brokers can still receive a procuration fee, which must be disclosed in


cash terms to the client, but brokers who charge for advice stand to lose


out.


Cat-standard mortgages will not carry redemption charges and interest will


be calculated daily with no separate charges for mortgage income


guarantees.


Chase de Vere Mortgage Management managing director Simon Tyler says: “It


is difficult to understand how you can restrict people from paying for


advice on products. The Government seems to be making the climate right for


misbuying. If they are trying to protect people from third-party advice


they are going the right way about it.”


Aifa director general Paul Smee says: “It is a shame the Government failed


to make provision for advice. They do not understand the value of advice.”


LibDem finance spokesman Vincent Cable says: “The problem is people may


believe the Government is recommending or underwriting the mortgage


product. If brokers cannot charge for selling these products, this


reinforces my fears.”

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