Mock Exams Flashcards
Which of the following organisations has regulatory powers in relation to the Consumer Credit Acts
of 1974 and 2006? The:
A Competition and Markets Authority (CMA).
B Financial Conduct Authority (FCA).
C Financial Ombudsman Service (FOS).
D Prudential Regulation Authority (PRA).
B Financial Conduct Authority (FCA).
Regulatory power in relation to consumer credit legislation was transferred from the OFT to the
FCA in April 2014, when the OFT was closed.
Jim is an accountant with a successful business, and is seeking a mortgage to buy a family home.
His mortgage adviser must treat Jim as a:
A business customer.
B eligible counterparty.
C private customer.
D professional customer.
C private customer.
A Although Jim runs a successful business, he is buying a family home. This does not meet the
criteria for him to be treated as a business customer.
B An eligible counterparty, in simple terms, is a large financial institution seeking execution of its
instructions. Jim does not meet this description.
C Correct. Jim is buying a family home, and there is no evidence to suggest that he meets the
criteria to be regarded as anything other than a private customer.
D To be treated as a professional customer Jim must have at least a year’s experience in the home
finance sector, in a professional position that requires knowledge of the product or service to be
arranged. Although he is an accountant, he does not appear to have any professional mortgage
experience.
Alan has received confirmation from his lender that his mortgage will not be a regulated mortgage.
This is most likely to be because:
A 20% of the building will be used as a shop.
B Alan bought the property for his daughter to live in.
C the property was purchased as an investment to be rented out.
D the property will be a holiday home.
C the property was purchased as an investment to be rented out.
A This would not necessarily prevent the mortgage being regulated if the rest of the property was
used as a non-investment dwelling.
B As long as 40% or more of the land was used as a dwelling and the property was not an
investment property, it would be regulated.
C Correct. The mortgage would not be regulated if the property was specifically for investment.
D This would not necessarily prevent the mortgage being regulated if at least 40% of the land was
used as a dwelling and it was not for investment purposes.
- Alberto took out a second charge on his house in 2014. What is the status of the loan?
A It will be subject to Financial Conduct Authority regulation under MCOB rules.
B It will be subject to Financial Conduct Authority regulation under the Consumer Credit Act 2006.
C It will not be a Financial Conduct Authority regulated loan.
D It will be subject to Prudential Regulation Authority regulation under the Consumer Credit Act 2006.
A It will be subject to Financial Conduct Authority regulation under MCOB rules.
The loan would be treated as a ‘back book loan’ and MCOB rules would be applied
retrospectively, even though the loan was taken out before second charges became subject to
MCOB.
Chris and Carol are looking to borrow the maximum amount possible to buy their first property, using a three-year fixed-rate mortgage at 3% reverting to the lender’s standard variable rate, which is currently 5%. Assuming no changes to the lender’s margin and using the FPC’s recommended interest rate, what is the minimum interest rate the lender should use when applying the ‘stress test’ to their affordability assessment?
A 5%.
B 6%.
C 7%.
D 8%.
D 8%.
The prevailing FPC minimum recommended rate is 3% to be applied to the lender’s current
reversion rate, therefore the overall interest rate to be used for the stress test in this case is 8%.
Anand and Mandeep have been asked to pay for a drainage search as part of the solicitor’s conveyancing process. This checks whether:
A the property is connected to mains drainage and water.
B there is any damage to the water and sewage pipes around the property.
C there is any history of flooding in the area.
D there are arrears on the water and drainage account.
A the property is connected to mains drainage and water.
Gregor has secured a new job and he and his partner Lisa have bought a property in Devon, near
to his new workplace, for £140,000 on a 50/50 tenants in common basis. This is Lisa’s first property
purchase, Gregor owns the London house in which he and Lisa lived previously and Gregor intends
to keep it for his daughter to live in.
How much stamp duty land tax (SDLT) would they have paid?
A £300.
B £2,100.
C £4,500.
D £7,000.
C £4,500
They would have paid £4,500 - £125,000 @ 3% (£3,750) and £15,000 at 5% (£750). Gregor already owns a property, which means that the additional 3% SDLT will apply to their
purchase, even though it is Lisa’s first property.
While negotiating the sale of his house, the vendor failed to disclose a dispute with his neighbour,
which was resolved some time ago. After completion, the neighbour decided to resurrect the
complaint with the new owner. What rights, if any, does the new owner currently have against the
vendor?
A Automatic compensation.
B None.
C To reverse the purchase and recover all costs.
D To take legal action.
D) If a vendor fails to disclose details of any dispute with a neighbour, even if this has been resolved, they may be subject to legal action if the next owner of the property subsequently becomes aware of the dispute.
Kristina has received confirmation that she can buy a flat under the government’s Help to Buy Equity Loan scheme. Which of the following statements is true?
A Kristina plans to let the flat to her friends
B Kristina will only be buying 50% of the flat.
C The Equity Loan can only be paid when Kristina sells the flat.
D The flat must be valued at £600,000 or less.
D The flat must be valued at £600,000 or less.
The property value cannot exceed £600,000 to qualify for the scheme.
Mike and Kate are wondering which type of mortgage would suit them best, as they are concerned
about interest rate volatility. Which statement is true of the interest rate options facing them?
A Interest rates for fixed-rate mortgages are directly linked to the interest rate paid on savings accounts.
B Rates on a Bank of England base rate tracker mortgage could change, if at all, twelve times a year.
C Rates on a Libor-linked mortgage will usually change, if at all, every three months.
D Standard variable-rate mortgages offer a degree of stability against interest rate rises.
C Libor-linked mortgages will change, if at all, every three months.
Diagnosis of which of the following medical problems is least likely to result in a successful claim
under a critical illness policy?
A Bowel cancer.
B Kidney failure.
C Loss of a leg.
D Severe angina.
D Severe angina.
Angina is not a condition covered by CIC policies.
Gwyneth is a qualified mortgage adviser, and is able to give advice on protection products
associated with mortgages. Under the ICOBS rules, which of the following requirements would not
apply if she arranged a level term policy for a mortgage customer? To:
A give the customer a statement of demands and needs.
B give the customer a suitability report.
C take care to ensure the cost of the policy is suitable for the customer.
D take care to ensure the customer would be eligible to make a claim.
B) give the customer a suitability report.
Suitability reports are not an ICOBS requirement.
Trevor and Karen are hoping to build an extension to their Grade II listed house to form a new
kitchen area, and plan to convert the existing kitchen into a dining room. The project:
A will not require listed building consent but will be subject to building regulations.
B will not require listed building consent or be subject to building regulations.
C will require listed building consent and will be subject to building regulations.
D will require listed building consent but will not be subject to building regulations.
C will require listed building consent and will be subject to building regulations.
The work will require listed building consent because it is a material change, and will be
subject to building regulations.
Oliver and Harriet are considering remortgaging their property, valued at £200,000. They have a
£160,000 standard variable-rate mortgage and require a £190,000 fixed-rate mortgage to build a
conservatory. What should concern them most?
A A new lender might impose a higher lending charge.
B The conservatory is unlikely to add any value to the property.
C The need to postpone the existing lender’s charge.
D They will have to pay early repayment charges on their existing mortgage.
A A new lender might impose a higher lending charge.
A As the new loan amount would be 87.5% of the property value, a lender might impose a higher
lending charge. These are often imposed where the loan-to-value exceeds 75%.
B It is usually held that improving a property, say, by adding a conservatory, would add to the
property value.
C Remortgaging is basically replacing existing borrowing. On completion of the remortgage, the
original lender would have no further interest in the property.
D It is unlikely that the existing variable-rate mortgage will carry early repayment penalties.
However, if it should, there is no necessity for funding to be sourced from the new lender.
Kevin is moving in with Paula, into her house in Norfolk, and will become joint owner of the
£300,000 property currently held in her sole name. He will also become a party to the £180,000
mortgage. Which of the following is true regarding stamp duty land tax (SDLT)?
A Kevin will have to pay SDLT on his £90,000 share of the mortgage at the appropriate rate.
B Kevin will have to pay SDLT on his £150,000 share of the house at the appropriate rate.
C Such arrangements are never subject to SDLT because the original purchaser would already have paid it.
D There would only be an SDLT charge if Kevin also paid Paula £35,000 or more to become joint owner.
D There would only be an SDLT charge if Kevin also paid Paula £35,000 or more to become joint owner.
SDLT is payable when the total consideration is above £125,000. The consideration is
the share of mortgage taken on plus any payment to ‘buy in’.
