Topic 19 - Interest-Rate Options Flashcards

1
Q

Standard variable-rate mortgage:

A

The interest rate varies with market rates in general.

They tend to have lower arrangement fees than fixed-rate or capped-rate mortgages and do not usually carry early repayment charges.

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2
Q

Discount-rate mortgage:

A

It offers a discount from the lender’s SVR for a given period.

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3
Q

Tracker mortgage:

A

Variable-rate mortgages that follow a stated interest-rate benchmark.

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4
Q

Some loans may be subject to compulsory purchase of an associated product such as:

A

-Buildings, contents and/or mortgage payment protection insurance.

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5
Q

Fixed-rate mortgage:

A

The rate is fixed for an agreed period.

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6
Q

Portability option:

A

This allows the borrower to take an existing arrangement to a new property without incurring an early repayment charge.

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7
Q

Capped-rate mortgage:

A

There is a limit on the rate the borrower pays for a period. There is usually a collar too which is a lower limit.

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8
Q

Flexible mortgage:

A

There is no specific definition of this but it will generally have the following features:

  • Daily interest calculation
  • The facility to make over-payments
  • The facility to underpay
  • The facility to take a payment holiday if circumstances warrant ti
  • Portability
  • Offset facility
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9
Q

Offset mortgage:

A

Mortgage and savings are held in linked accounts. The savings are offset against the mortgage account, which means that mortgage interest is only charged on the balance.

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10
Q

Flexible mortgages are generally suitable for who?

A

Those at the higher end of the market in terms of financial awareness.

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11
Q

What product incentives might be offered?

A
  • Waiver of valuation fee
  • Waiver of legal fees
  • Free insurance for a given period
  • A cashback facility
  • Portability
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