Unit 3 Topic 1

Question 1

How do specialist mortgage houses differ from banks and building societies?

A Their loans do not attract interest relief.
B They obtain their funds from the wholesale market.
C They lend at fixed rates of interest only.
D They offer only repayment mortgages.

Answer 1

B They obtain their funds from the wholesale market.

Question 2

What type of organisation is specifically restricted by legislation on the amount
of commercial mortgages it can provide to corporate borrowers?
A Bank
B Building Society
C Finance House
D Investment Company

Answer 2

B Building Society

Question 3

Which of the following is true in relation to institutions operating in the mortgage market?
A Specialised mortgage houses are limited companies funded mainly from the
wholesale market.
B Specialised mortgage houses lend on a decentralised basis.
C Building societies are legally restricted to lending on residential property.
D Building societies must devote a minimum of 85% of their total lending
activities to residential mortgages.

Answer 3

A Specialised mortgage houses are limited companies funded mainly from the
wholesale market.

Question 4

Which of these statements is true in relation to general inflation and house price
inflation?
A General inflation tends to run ahead of house price inflation .
B House price inflation tends to mirror general inflation.
C House price inflation is always ahead of general inflation.
D House price inflation normally runs ahead of general inflation.

Answer 4

D House price inflation normally runs ahead of general inflation.

Question 5

What is the main driver for the Monetary Policy Committee to adjust interest 
rates?
A Borrowing targets 
B Consumer spending
C European Directives 
D Inflation targets

Answer 5

D Inflation targets

Question 6

Which of the following is most likely to affect interest rates?
A House prices
B The level of commercial debt
C The level of government borrowing
D The Repo rate

Answer 6

C The level of government borrowing

Question 7

Which of the following is least likely to cause a downturn in the mortgage 
 market?
A A low rate of general inflation
B A weakening economic outlook
C Increasing interest rates
D More sellers than buyers

Answer 7

A A low rate of general inflation

Question 8

Oxbridge Building Society intends to alter its lending policy and restrict its
lending on residential mortgages to a maximum of 50% of its total lending
activities. If it proceeds, it will need to:
A Convert to plc status.
B have its business plan agreed by the Bank of England.
C obtain approval from the Financial Services Authority.
D seek a positive ballot of 75% of its members.

Answer 8

A Convert to plc status.

Question 9

Specialised mortgage houses primarily raise their funds for lending from which 
source?
A Central banks.
B Corporate bond issues.
C Individual investors.
D Wholesale markets.

Answer 9

D Wholesale markets.