A CAT mortgage is one that meets a number of government defined standards relating to 'C'harges, 'A'ccess and 'T'erms.

According to the Treasury, the objective of CAT standards is to 'prevent confusing marketing and hidden charges'. The Government is seeking to set out basic and transparent conditions for mortgage products.

CAT standards won't apply to all mortgages. They are voluntary, so mortgage lenders don't have to use them.

The literature or other information you get about a particular mortgage will say whether it's a CAT-standard or not. If you take out a CAT-standard mortgage, you can be confident that it has no nasty surprises hidden in the small print and that the terms won't suddenly change for the worse.

Mortgages that are not CAT standard are not necessarily bad buys. They may offer features that will interest some people, such as a highly attractive interest rate, but be accompanied by charges or penalties which do not meet the CAT standard.

Remember - the CAT standard:

• does not mean the government guarantees the mortgage;
• does not mean the government recommends or endorses the mortgage;
• does not mean the mortgage is necessarily suitable for you; and
• does not mean the mortgage is the best deal available.

Here follows a summary of the CAT Mortgage Standards relating to variable, fixed, discount, cash back and capped rate mortgages.

Charges

• Interest must be calculated daily
• Full credit for all payments when made
• No separate charge for mortgage indemnity guarantee (MIG)
• All other fees disclosed in cash upfront
• Borrowers pay no fees to brokers

Variable rate loans

• No arrangement fee
• Interest rate no more than 2% above Bank of England base rate
• When the base rate falls, the interest rate must adjust within a calender month
• No redemption charges at any time

Fixed and capped rate loans

• Maximum booking fee is £150
• Maximum redemption charge is 1% of the amount you owe for each remaining year of fixed period, reducing monthly
• No redemption charge after the end of the fixed or capped period
• No redemption charge if you stay with the same mortgage lender when you move home

Access

• If there is a minimum amount you must borrow to get a CAT-standard mortgage, it has to be £10,000 or less
• Any customer may apply
• The lender's normal lending criteria apply
• Provided your lender is happy to lend on the new property, you can continue with your CAT-standard mortgage when you move home
• If you make regular payments, you can choose which day of the month to pay
• You can make early repayments at any time

Terms

• All advertising and paperwork must be straightforward and clear
• You do not have to buy any other products to get a CAT-standard mortgage
• Your lender must give at least 6 months' notice if they can no longer offer your mortgage on CAT-standard terms
• If you are in arrears you should pay interest only on the outstanding debt at the normal rate