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Cemap 2 Topic 1

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Cemap 2 Topic 1 What factors hampered the recovery of the property market following 07-09 financial crisis? - ✔✔Recession, banks wasn't lending What are the contributing factors that make it difficult for first time buyers? - ✔✔stringent affordability test, larger deposits, higher house prices When interest rates are low for a prolonged period of time what is likely to happen to property prices? - ✔✔Rise Interest rates on mortgage loans are closely linked to which interbank lending rate? - ✔✔3 month LIBOR Inflation can be reduced by reducing interest rates. True or false? - ✔✔False What % of a building society total lending must be related to residential mortgages? - 25% - 50% - 75% -90% - ✔✔75? What is meant by securitised lending? - ✔✔Bundle many mortgage loans and selling them to another business Sub prime lending is? - ✔✔Lending to someone who has a poor credit history Sub prime lending is always classified as irresponsible. True or false? - ✔✔False How was the market stimulated in the 07-09 financial crisis? - ✔✔Bank rate cut to 0.5% What was the funding for lending scheme introduced by BoE following financial crisis? - ✔✔BoE lends money to financial institutions at below market rates What does Recession mean? - ✔✔Decline in GDP (value of all goods and services) for 2 successive quarters 6 months List some factors that affect the mortgage market - ✔✔- Interest rates - Inflation - Economy - Supply/Demand - Government action Define; LIBOR, Bank Rate, Basis Point - ✔✔- Rate at which banks lend to eachother - Rate at which BoE lends to financial institutions - One-hundredth of 1% Is inflation good for the economy? - ✔✔Yes, a small amount of 2% is healthy How can the BoE reduce inflation? - ✔✔Increase interest rates > Disposable income reduces > Prices become lower What is negative equity? - ✔✔Market value of property falls below outstanding amount of mortgage loan secured SDLT is now exempt on up to how much of a first time buyers house? - £250k - £300k - £350k - £400k - ✔✔£300,000 first time SDLT exemption What is cross-selling? - ✔✔Selling other products while selling something. EX.Banks selling insurance with mortgages etc What is a centralised lender? - ✔✔Subsidiaries of larger financial institutions funded from the wholesale market. Common to package a number of mortgages and sell them to other organizations. Prime lending vs Sub prime lending - ✔✔Prime = Borrowers who meet lenders standard criteria and represent normal risk Sub-prime= Lending to those who represent higher risk than normal What is "Sale and rent back" & what is minimum term fixed tenancy must be agreed for? - ✔✔Company buying a property from owner below market rate then renting it back to them. Must be an agreed fixed tenancy of AT LEAST 5 YEARS Are Sale and rent back regulated by the FCA? - ✔✔Yes What is bridging finance? - ✔✔Required when a borrower wishes to move house but has not managed to sell their existing house. Short term loan repaid when existing house is sold (Think of lady you bought from) Do the Local authority offer mortgage schemes? - ✔✔Yes the LAMS aimed at first time buyers with at least a 5% deposit provides indemnity for lender to cover gap between 75% and 95% of property value. Increases supply of affordable housing Is LAMS only aimed at first time buyers? - ✔✔Yes What is the minimum % deposit needed with a LAMS? - ✔✔5%

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