Unit 3:1 Property and Mortgage Markets Flashcards
1
Q
Bank Rate / Base Rate / BO E Rate
A
- the interest rate which the Bank of England lend to financial institutions
- usually lowest rate as banks will lend at a higher rate
2
Q
Interbank Rate
A
- the interest rate which banks lend to each other, higher than base rate so banks can make profit
3
Q
Monetary Policy Committee
A
- Meet 8 times a year and adjust interest rates to meet inflation targets (which is 2% set by the government)
- Every 6-8 weeks
4
Q
What affects interest rates
A
- Level of government borrowing
- Higher levels of individual borrowing
- Monetary Policy
5
Q
Consumer Price Index
A
- is what is used to measure inflation
6
Q
How can Bank of England reduce inflation?
A
- raising interest rates, discourage spending
7
Q
How can Bank of England increase inflation?
A
- lowering interest rates, encourages spending
8
Q
Negative Equity
A
-market value of your property falls below what you paid for it
9
Q
Types of Mortgage providers
A
- banks
- building societies
- insurance companies
- specialised mortgage companies
- challenger banks
10
Q
Specialised mortgage companies
A
- limited companies
- funded by the wholesale markets
11
Q
Mortgage Packers
A
- help mortgage advisers with admin
- ‘middle men’
12
Q
Sub-Prime Lending
A
- lending to borrowers with higher risk
- poor credit history, low credit scores, no credit history, high debt-to-income ratios, self-employed without proof of income, irregular income like freelancers, recent bankruptcy or IVAs, multiple loan applications in a short time, mortgage arrears, or part-time workers with low income
13
Q
Second Charge Loans
A
- where you take a second mortgage on the same property
- use the equity in their house to get a new mortgage, split it over a longer term and use the money to do what they want with it
14
Q
Bridging Finance
A
- bridging finance bridges a finance gap
- short-term loan to help you buy a new house before selling your old one. You pay it back quickly, usually within a year
15
Q
Basis Point
A
- one-hundredth of one percent
- 1 basis point is 0.01
16
Q
Building Societies Restrictions
A
- they can’t have more than 25% of their loans as commercial mortgages
- at least 50% of what they lend has to be for residential mortgages (people buying homes)
- their main job is still helping people buy houses
- they face more restrictions on business activities compared to regular banks
17
Q
Types of Property Ownership
A
- Freehold: You own everything forever
- Leasehold: You own temporarily and pay rent
- Share of Freehold: You and neighbours jointly own everything
- Commonhold: You own your unit completely and share common areas
18
Q
Sale and Rent back
A
- sell your house for quick cash but keep living there as a renter
- usually pays less than market value but gets you money fast when you’re desperate.
- 5-year minimum tenancy period
