Topic 1 - Property and The Mortgage market Flashcards
What is securitisation
When mortgage providers package loans into bundles and sell them all over the world.
Why do securitisation
Removes loans from balance sheets and proceeds give more capital to invest
What 6 issues can effect the mortgage market
Interest rates Inflation Economy Supply and Demand Government Action Non-property funding
What two rates can affect mortgage interest rates
Bank Rate and Libor
What is “three month libor”
The rate for loans that will mature in 3 months time
Difference between Lib or and bank rate?
Libor is the rate at which banks lend to each other.
Bank rate is the rate the Bank of England lends to other institutions.
What is basis point
One hundredth of one percent
What is Sonia and why do we now use it
Sterling overnight index average: trying to now use instead of Libor as it’s difficult to manipulate.
What factors effect interest rates.
Government borrowing- raises
High individual borrowing- lots of money in economy and prices creep up so government up interest rates
Monetary policy- government controls economy using interest rates.
Foreign interest rates- uk rate higher, pound is higher so uk products expensive
How can the Bank of England change inflation.
High interest rates- people with less money- less demand- prices lower
Low interest rates- people with more money to spend- more demand- rates go up
What actions has the government taken on the property market
First time buyer SDLT exemption
3% surcharge on SDLT for BTL
Help to buy
Changes to mortgage tax relief
Building societies must devote how much to Residental mortgages?
75%
What is a mortgage packager
A mortgage packager are companies that are middlemen between brokers and lenders. they do all the stuff a lender would do so as instruct a valuation etc and check documents and get your mortgage up to offer stage. They are sometimes used by brokers with hard to place cases. As they usually concentrate on a specified number of lenders, the staff at the packager have indepth knowledge regarding lender products, requirements and attitudes towards certain things. They are paid by the lender on completion and part of the payment goes towards to broker.
What is sub prime lending
Lending to borrowers that represent a higher risk than normal
