Redmill Week 1 Flashcards
Define the Prudential Regulation Authority
The Prudential Regulation Authority is a limited company owned by the Bank of England and ran by the Prudential Regulation Committee.
What are the two statutory objectives of the PRA?
- To promote safety and financial soundness of firms they regulate.
- For insurance companies, to secure an ‘appropriate level’ of protection for policy holders and to minimize the impact on stability if the insurer fails.
What is the secondary objective of the PRA?
To facilitate effective competition.
What is the Financial Policy Committee?
The Financial Policy Committee is a macro-level committee that are tasked with spotting emerging risks in attempt to reduce/remove systematic risk.
What is ‘Onshoring’
Onshoring is where EU regulations were made UK law
What does the FCA cover?
The FCA covers sales and marketing of all firms and prudential regulation of smaller firms.
How is the FCA financed?
The FCA is financed by a levy on all regulated firms.
What is the one strategic objective of the FCA?
The strategic objective of the FCA is to ensure that markets function well.
PEP
What are the three operational objectives of the FCA?
The three operational objectives of the FCA is:
- Protection of customers.
- Ensuring the integrity of the UK financial markets.
- Promoting competition.
The FCA does not regulate buy-to-let mortgages, what is the only situation where they will?
The FCA only regulates buy-to-let where it is a consumer buy-to-let and the individual became a landlord accidentally.
Who is exempt from direct FCA authorisation?
The Bank of England, Local Authorities, the European Central Bank and Appointed Representatives are exempt.
How often does the Senior Management and Certification Regime need to be reassessed by firms?
The SM&CR needs to be reassessed on an annual basis by firms.
Who does the Rules of Conduct apply to?
The rules of conduct applies to everyone else.
When did the changes come into place from the Mortgage Market Review?
26th April 2014
Which were the 5 main changes following the Mortgage Market Review in 2014
The main changes following the MMR was:
- The onus of assessing affordability fell on the lender.
- Non-advised sales were no longer permitted unless a HNWI or home finance professional
- Vulnerable customers had to have advice
- Lenders must provide key information before contract is completed.
- All advisers must hold a relevant mortgage qualification
What are the conditions for a mortgage to be a regulated contract under MCOB?
TI be a regulated mortgage under MCOB:
- A loan must be provided from lender to borrower
- Must be secured against land in the European Economic Area (EEA)
- At least 40% of the land must be used or intended to be used by the borrower or a related person
- Mortgage must not be a home purchase plan, limited payment, second charge or bridging loan.
What type of morgages are not regulated?
Buy-to-let mortgages and loans to a company or a loan for commercial property are not regulated by MCOBs.
In which situations are execution only mortgages available:
An execution only mortgage is available where:
- Not possible or practical to provide advice
- One is a high-net-worth individual
Customer is a mortgage professional holding their position for at least a year
- A customer rejects advice
What would classify one as a High-net-worth-individual from a mortgages standpoint?
Someone with an annual net income of no less than £300,000 or net assets of no less than £3million
Who is the ‘mortgagor’?
The mortgagor is the borrower
Who is the ‘mortgagee’?
The mortgagee is the lender
What is the order of the two transfers of rights in relation to a mortgage
From the seller to the buyer, then the buyer to the lender
What needs to be in place for a mortgage to have legal standing
For a mortgage to have legal standing, it must:
- Be in writing
- Signed and dated
- Witnessed
- Sealed
How long is a cooling off period on a mortage?
There is no cooling off period on a mortgage
What does the term discharged mean?
Discharges means that the mortgage has been paid off and ended
In which three ways can a mortgage be discharged?
A mortgage can be discharged by:
- An agreement to end the mortgage and replace with a new one (remortgage)
- The borrower has paid in full
- The borrower breaches the terms of the contract and the lender has to take legal action to seek what is owed
What is equity redemption?
Equity redemption is the right to repay your mortgage at any time
What type of mortgages are early repayment charges always a part of?
Early repayment charges are always part of a fixed rate mortgage
What is a supported and unsupported guarantee?
A supported guarantee involves the offering as a security as collateral of the guarantor. Whereas, unsupported does not involve security, just a promise to pay
Who owns all land in the UK?
The Crown owns all of the land in the UK
Which type of property ownership is the highest form of ownership?
Freehold is the highest form of home ownership
What requirements need to be in place for a leaseholder to buy the freehold?
To buy the freehold:
- At least one half of qualifying tenants agree to the purchase
- The lease must be a long lease of 21 years or more
- Tennant must have lived in the property for at least 2 or more years
What is the relationship between commercial property and interest rates?
There is an inverse relationship between commercial property and interest rates. If interest rates increase, prices decrease
Which is more volatile and less liquid, Commercial property or residential property?
Commercial property is both less liquid and more volatile
What type of policy is the controlling of interest rates to manipulate inflation?
Controlling interest rates is a form of monetary policy
What type of policy is the controlling of taxation and government spending to control inflation?
The controlling of taxation and government spending is called fiscal policy
What is ‘fiscal drag’?
Fiscal drag is where income from taxation increases without increasing tax rates
What is a second mortgage/second charge?
A second mortgage/charge is a loan secured on the property with another provider than the original lender
What are the requirements as a result of the Mortgage Credit Directive on second mortgages?
- They must have appropriate permissions to arrange
- Details of the product mist be clearly presented and explained
- A European Standardised Information Sheet must be provided to the customer
- There must be a 7 day reflection period
- Affordability checks must be carried out by the lender
Can a limited company enter into a mortgage contrcat?
Yes, a limited company can enter a mortgage contract
What is a Special Purpose Vehicle (SPV)
A special purpose vehicle is a limited company that is set up to hold property and not perform any other activity
How much discount do you get under the right to buy scheme for between 3 to 5 years residency
For a 3-5 year residency, you will get a 35% discount under the right to buy scheme
How much of a discount do you get with the help to buy scheme if you have a 5 year + residency?
You will get a 1% increase each year on top of the 35%
DO you have to have been a resident in the same council home to qualify for the Right to Buy sheme?
No you do not need to be resident of the same home for the period of time
What is ‘staircasing’?
Staircasing relates to shared ownership where you can buy additional shares of the property up to 100%
What is the maximum household income for shared ownership?
The maximum household income for shared ownership is £80,000 outside London and £90,000 inside London
What is the maximum value of a property for a Help to Buy Equity Loan?
The maximum property value for a help to buy equity loan is £600,000
How long is it before a home equity loan becomes payable?
A home equity loan is not repaid for the first 5 years
What is the maximum monthly contribution for a Help to Buy ISA?
The maximum monthly contribution for a help to buy ISA is £200
Can help to buy ISAs be Stocks and Shares as well as Cash?
No, help to buy ISAs are cash only
What is the maximum property value for a help to buy ISA?
For a help to buy ISA, the maximum property value is £450,000 inside London and £250,000 outside London
What is the oldest age you can open a Lifetime ISA
The oldest age you can open a Lifetime ISA is age 39
When does the LISA bonus stop being paid?
The LISA bonus stops at age 50
How many years of accounts do lenders require for self employed?
Lenders usually require 3 years accounts for those who are self employed
When must all key information be provided?
All key information must be provided before completion
When is the ‘point of no return’ in Scotland
In Scotland, the point of no return is on ‘conclusion of missives’
How long is the cooling off period for a mortgage?
With a mortgage, there is no cooling off period
What is a positive covenant?
A positive covenant is a condition attached to the property requiring the owners to do something (maintain and upkeep of the land). They run with the title.
What does ‘run with the title mean’
‘Running with the title’ means that conditions and responsibilities pass from one owner to the next
What is an Easement?
An easement is the right in favour of one piece of land over another.
What is a restricted covenant?
A restricted covenant is a condition attached to a title, stopping an owner from doing something. They run with the title.
What may invalidate a will?
A will can be invalidated by:
- Not being signed
- Not being the original will
- Not the latest will
- Testator was not of sound mind when creating the will or was unruly influenced
Who sets interest rates?
The Monetary Policy Committee (MPC) sets interest rates.
What is the minimum age you can get a mortgage in the UK?
The minimum age for a mortgage in the UK is 18. However, you could open a business at 16 and that business could then own the property.
