Lib Dems' stakeholder mortgage dismissed as repeat of failed CAT
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Ray Boulger, senior technical manager at John Charcol, has hit out at calls for a stakeholder mortgage to be introduced and says it has already been tried and failed.
Last week Liberal Democrat shadow chancellor Vince Cable called for a simpler and safer stakeholder-style mortgage to be introduced.
Cable says: “With the complex mortgage market we have, highly prescriptive rules for mortgage affordability are not appropriate. It is critical that a simple and safe stakeholder-style mortgage as the Liberal Democrats have proposed is introduced.”
But Boulger says: “Maybe Cable has a short memory or maybe he is not familiar with the mortgage market.
“If he had done a little research before calling for stakeholder mortgages he would have discovered that the government launched a product along these lines at the end of the last decade. They were called CAT standard mortgages and bombed in a big way.”
CAT - charges, access and terms - included features such as daily calculated interest, no early repayment charges and no higher rate if borrowers fell behind with their repayments.
They also did not have broker fees.
Boulger says: “CAT standard mortgages disappeared from the market for the simple reason that the costs for lenders of meeting the CAT criteria meant they either had to price mortgages uncompetitively or take a hit on their margins.
“Most borrowers who took out a CAT standard mortgage were effectively paying for every CAT feature as each feature had a cost and it was all or nothing. Thus nearly every borrower who bought a CAT mortgage paid over the odds.”
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