Chapter 1 — The Mortgage Market

Question 1

What are the four key customer segments in the UK mortgage market?

Answer 1

Mainstream, Subprime, Residential Investors, Commercial Investors

Question 2

What is the CPI target set by the Bank of England for inflation?

Answer 2

2%, with a tolerance of ±1%

Question 3

Who sets the UK base interest rate and how often?

Answer 3

The Monetary Policy Committee (MPC), eight times per year

Question 4

Define ‘securitisation’ in mortgage lending.

Answer 4

The packaging of mortgage debt into tradeable securities via an SPV

Question 5

What is the difference between full recourse and limited recourse lending?

Answer 5

Full: borrower liable for all outstanding debt; Limited: lender’s recovery limited to property value (more common in the US)

Question 6

What are the main benefits of securitisation for lenders?

Answer 6

Releases capital, earns upfront profit, transfers risk, reduces capital adequacy requirements

Question 7

Why is commercial property less liquid than residential?

Answer 7

Fewer buyers, higher transaction values, and longer sale periods

Question 8

What are common supply-side restrictions in the UK housing market?

Answer 8

Planning delays, land banking, demolition, and low local targets

Question 9

Name two reasons the average first-time buyer age is increasing.

Answer 9

Higher property prices and larger deposit requirements

Question 10

What key Government measure reduced demand for buy-to-let?

Answer 10

Reduced tax relief, additional SDLT, tighter lending rules