CS - Hugo + Sarah

Question 1

Personal circumstances

Answer 1

• likely to both have cars as school is 20/25 miles away
• looking to move closer to school
  
  • transport costs will fall

Question 2

Personal considerations

Answer 2

• if planning to have children?
• if planning to look for a promotion - could’ve been reached for 4/5 yrs
• if going to look for a bigger house after this 1
  
  • most don’t stay in 1st house they buy: try scale up as equity grows + salaries rise

Question 3

Savings

Answer 3

• lives w Sarah’s parents to save in essential spending
• implies they lived rent free + didn’t pay gas, electricity, water, council tax
• may mean didn’t pay as much towards food = able to save targeted amount

Question 4

How have house prices changed?

Answer 4

• inc. since time article was written
• but w interest rates inc. = house prices likely to soon fall

Question 5

What caused inflation (article)?

Answer 5

• suggests it was caused by covid
• as economy emerged from lockdown restrictions households has savings + money to spend as previously didn’t have opportunity to go out
• = inflation as businesses unable to inc. supply to meet demand
• some workers had left, fallen ill or made redundant from covid

Question 6

Impact of inc. interest rates

Answer 6

• inc. inflationary pressure led to inc. interest rates
• loans more expensive so borrowing dec. so less consumer spending
• less eco. activity so demand in economy falls + prices become more stable

Question 7

Impact of inc. interest rates on Hugo + Sarah

Answer 7

• inc in mortgage rates
• mortgage repayments inc. = dec, demand for housing
• likely if interest rates continue to rise, house prices will fall at some point

Question 8

What should Hugo + Sarah do?

Answer 8

• may be sensible to wait + delay buying house if think prices will fall
• could continue to rent + build up savings rather than buying a house that could fall in value in ST
• smart to wait until house prices fall to lowest amount + then buy

Question 9

Vernon building society

Answer 9

• could be good option for H+S as has no fees
• set at 0.15% below SVR so if interest rates fall, mortgage repayments fall too
• however is £14.83 more /month

Question 10

Nationwide Building Society

Answer 10

• fixing at this rate advisable if predicted bank rate will continue to inc,
• if bank rate though to dec., it’s I’ll advised to fix at this rate

Question 11

First Direct

Answer 11

• best option for H+S
• 5 yrs w £490 fees
• £490/60 = £8.17 = added to monthly repayments so effectively £1102 = £15 saving/month compared to Vernon
• cheaper repayment: £91/month < Nationwide + £23/month < Vernon (fees so effectively £15 cheaper)

Question 12

What mortgage should they choose?

Answer 12

First Direct bc:
- has cheaper monthly repayments
- fees considerably < Nationwide
- in 5yrs, interest rates likely to be lower + life may have changed for H+S: may want to pursue promotions + consider children
- would have more equity in 1st house + likely to have higher incomes: will want to sell + buy a diff property (easier w/o being tied to a particular mortgage deal)

Question 13

Impact of inc. demand for H+S

Answer 13

• demand for properties outside cities has inc.
  
  • they live in rural wales
  • inc. comp for housing pushes up prices

Question 14

What is the decision dependent on?

Answer 14

• attitude to risk
  
  • security: 10yr fixed w Nationwide
  • 5 yr First Direct is 1/2 term: risky as don’t know financial position in future

Question 15

Additional costs

Answer 15

• no stamp duty on house prices up to £225k in Wales
• may inc. solicitor/surveyor/moving fees

Question 16

Length of mortgages

Answer 16

• can by 5, 10 or whole 25 yrs
• if agree on a 5 yr mortgage (First Direct) you pay that rate for 5yrs - 4.4% in this case
• when 5 yrs is up customer can sign up for another mortgage w any provider (usually a fee) or can stay on the SVR w First Direct