TOPIC 1 - Property and Mortgage Markets Flashcards
The process of packaging a number of mortgages into ‘bundles’ and selling them to other institutions is known as:
consolidation.
securitisation.
leveraging.
securitisation.
Mortgage providers package mortgage loans they hold into bundles and sell them to other institutions all over the world. This process, known as securitisation, removes the loans from the lenders’ balance sheets, and the proceeds of the sale gives them more capital to invest. The institutions that buy the mortgage bundles receive the stream of income from mortgage interest payments, together with capital repayments.
Which of the following actions has the UK government taken to encourage first-time buyers?
Relaxing MCOB rules on affordability for first-time buyers.
Introducing measures to make buy-to-let investment more attractive.
Requiring new developments to include affordable housing.
Requiring new developments to include affordable housing.
Inter-bank rate is set by:
The Bank of England base rate.
Libor.
SONIA.
SONIA.
Which of the following is true in relation to interest rates?
A significant increase in government borrowing would place downward pressure on interest rates.
Increased demand for borrowing tends to lead to a decrease in interest rates.
When UK interest rates are higher than those abroad, the value of sterling increases.
When UK interest rates are higher than those abroad, the value of sterling increases.
The value of sterling against foreign currencies is affected by interest rates. When UK interest rates are higher than those abroad, the pound is popular and the exchange rate increases. This can have a negative effect on industry, because UK goods become expensive abroad and sales may be affected.
In relation to inflation:
the Monetary Policy Committee’s inflation target is based on the Consumer Prices Index.
any level of inflation is considered to be bad for the economy.
general inflation tends to run at a higher rate than house-price inflation.
the Monetary Policy Committee’s inflation target is based on the Consumer Prices Index.
What is the maximum percentage of total lending activities that a building society can allocate to lending not for residential mortgages?
25%.
50%.
75%.
25%.
Specialised (centralised) mortgage lenders raise funds for mortgage lending:
on the retail market.
from depositors.
on the wholesale market.
on the wholesale market.
Specialised mortgage houses are funded from the wholesale market and lend on a centralised basis.
Sale and rent back arrangements involve a company buying a property from its owner:
usually at market value, then renting it back to them.
usually below market value, then renting it back to them.
usually below market value, then renting it to a separate person.
usually below market value, then renting it back to them.
Which of the following is a contributing factor to the difficulties experienced by people seeking to buy their first home?
Rising property prices.
Falling property prices.
A growing economy.
Rising property prices.
When interest rates are low for a prolonged period, what is likely to happen to property prices?
They are likely to stay the same.
They are likely to fall.
They are likely to increase.
They are likely to increase.
Libor replaced Sonia as the inter-bank lending rate from the end of 2021. True or false?
True False
False - Sonia replaced Libor as the inter-bank rate.
The level of government borrowing has no influence on interest rates in the UK. True or false?
True False
False: When government borrowing increases, interest rates generally increase.
What percentage of a building society’s total lending activities must be related to residential mortgages?
25%.
50%.
75%.
90%.
75%.
What is meant by ‘securitised lending’?
Selling one mortgage loan to another business.
Bundling together a number of mortgage loans and selling them to another business.
Retaining all mortgage loans but increasing the security required from borrowers.
Bundling together a number of mortgage loans and selling them to another business.
Securitised lending involves bundling together a number of mortgage loans and selling them to another business. The seller receives a capital sum that they can use to offer further mortgage loans. The buyer receives the regular income stream from borrowers’ repayments on the bundled mortgages.
Lending to people who have county court judgments against them is referred to as ‘sub‑prime’ lending. True or false?
True False
True
