Property and Mortgage Markets Quiz

1. What is the primary purpose of a mortgage in residential property purchases?

A) To enable buyers to borrow funds secured against the property at a low interest rate

B) To be able to let the property out

C) To eliminate the need for a deposit when purchasing a home

D) To give lenders automatic repossesion right on default

2. Why are residential mortgages considered lower risk for lenders compared to unsecured loans?

A) Because they are insured by the government

B) Because the loan is secured against the property through a legal charge

C) Because it is mandatory for residential borrowers to have excellent credit

D) Because mortgage interest rates are fixed for long timeframe

3. Which of the following best describes the UK mortgage market since the 1980s?

A) Monopolistic with limited competition

B) Dominated exclusively by government-backed lenders

C) Highly competitive due to deregulation and borrower sophistication

D) Dominated by a single lender

4. What was a major cause of the 2007-08 credit crunch in the mortgage market?

A) Excessive regulation preventing lending

B) Government mandated lending

C) Government restrictions on mortgage securitisation

D) Lenders relaxing criteria and issuing high-risk sub-prime mortgages

5. What is ‘securitisation’ in the context of mortgages?

A) Bundling mortgages and selling them to other lenders

B) Converting property deeds into government bonds

C) Offering fixed-rate mortgages with no early repayment charges

D) A process where borrowers insure their mortgages against default

6. Which UK bank was nationalised in 2008 due to liquidity issues linked to risky mortgages?

A) Barclays

B) Northern Rock

C) HSBC

D) Lloyds Banking Group

7. How did the credit crunch affect interbank lending rates?

A) Rates decreased significantly due to surplus liquidity

B) Rates were abolished temporarily C) Rates increased as banks became reluctant to lend to each other

D) Rates remained stable due to government intervention

8. What was a key consequence of the credit crunch for UK mortgage lending criteria post-2008?

A) Lenders reduced deposit requirements

B) Sub-prime lending increased to stimulate the market

C) Mortgage interest rates were frozen indefinitely

D) Lenders adopted stricter affordability checks and higher deposit demands

9. What was a major factor contributing to the UK housing market recovery after 2013?

A) Government initiatives to boost lender liquidity and lower interest rates

B) A sudden decrease in demand for mortgages

C) The abolition of stamp duty land tax D) A sharp decline in property prices across major regions

10. Why did London’s housing market experience faster price growth than other UK regions?

A) Because of economic struggle in the north

B) Because of limited supply, high demand, and commuter belt influences

C) Because of reduced tax incentives for living there

D) Due to government rent controls outside of London

11. What impact did the COVID-19 pandemic have on UK housing demand in 2020-21?

A) Demand decreased as people avoided long-term financial commitments

B) It became mandatory for lenders to sign up to the Mortgage Charter which lowered demand

C) Demand shifted from city flats to homes with outdoor space, boosting commuter belt prices

D) House prices fell uniformly across all regions

12. What was the main reason for the slowdown in UK house price growth in 2023?

A) A sudden drop in inflation and interest rates

B) An oversupply of new housing developments

C) Excessive regulation

D) Rising interest rates

13. Why are first-time buyers crucial to the overall health of the housing market?

A) They enable existing homeowners to sell and move up the property ladder

B) They increase rental demand, making rent more affordable

C) They exclusively purchase new-build properties

D) Government programmes require them to be able to function

14. Which government policy was introduced to support first-time buyers?

A) Tax relief on mortgage interest payments

B) More favourable Stamp Duty Land Tax arrangement

C) A ban on buy-to-let mortgages below £200k property valuation

D) Fixed mortgage rates for 10 years

15. What challenge do first-time buyers face in high-price areas like London?

A) Oversupply in the workforce

B) Lack of mortgage products available

C) Difficulty in securing large enough deposits due to high property prices

D) Government restrictions on homeownership

16. How do high interest rates typically affect the housing market?

A) They increase demand for mortgages due to lower borrowing costs

B) They have no impact on mortgage lending

C) They encourage speculative property investments

D) They reduce affordability, leading to lower demand and falling prices

17. What is the Bank of England’s inflation target as measured by the CPI?

A) 2%

B) 1%

C) 3%

D) 2.5%

18. How does the Monetary Policy Committee influence inflation?

A) SONIA price adjustments

B) By adjusting base-rate to control spending and borrowing

C) By imposing taxes on mortgage lenders

D) Power to freeze mortgage product interest rates

19. What is the relationship between general inflation and house price inflation?

A) House price inflation always matches general inflation

B) General inflation has no correlation with housing costs

C) House price inflation typically outpaces general inflation

D) High general inflation always leads to falling house prices

20. What is the sterling overnight index average?

A) A government scheme for first-time buyers

B) A type of sub-prime mortgage

C) A measure of regional house price variations

D) The interbank lending rate used as a benchmark for mortgages

21. What is a tracker mortgage?

A) A mortgage where the interest rate follows the Bank rate or interbank rate

B) A mortgage where the rate can change at anytime

C) A mortgage exclusively for buy-to-let investors

D) A government-subsidised mortgage for low-income buyers

22. What was a key outcome of the Mortgage Market Review (2014)?

A) Lenders were required to relax affordability checks

B) Stricter affordability criteria were imposed on mortgage lenders

C) Mandatory capital and interest repayment on residential property above a £300k valuation

D) Sub-prime lending was encouraged to boost the market

23. What is a ‘basis point’ in financial terms?

A) A fixed fee charged on all mortgage applications

B) A measure of property price fluctuations

C) One-hundredth of one percent

D) A type of mortgage insurance

24. How did the temporary increase in the SDLT threshold (2020-21) affect the housing market?

A) It caused an immediate drop in house prices

B) It led to a freeze on all new mortgage approvals

C) It only applied to buy-to-let properties

D) It boosted demand as buyers rushed to benefit from tax savings

25. What trend has been observed among first-time buyers in recent years?

A) They are older and need larger deposits due to rising prices

B) They are younger and require smaller deposits than in the past

C) They largely rely on government grants for home purchases

D) They avoid fixed-rate mortgages due to high interest rates

Types of Borrower Quiz

1. What are the three key factors (the "Three Ps") lenders assess in a mortgage application?

A. Person, Property, Purpose
B. Property, Purpose, Profit
C. Payment, Profession, Property
D. Personal income, Property value, Previous loans

2. What does "joint and several liability" mean in a mortgage context?

A. Each borrower is responsible only for their share of the loan
B. All borrowers are individually liable for the full loan amount
C. Liability is shared equally between lenders and borrowers
D. Only the primary borrower is liable for repayments

3. Which of the following is not a typical reason for private borrowers to seek a mortgage?

A. Purchasing a family home
B. Financing a buy-to-let property
C. Funding a business startup
D. Bridging finance for a new property before selling an existing one

4. What is the primary motivation for Buy to Let borrowers?

A. To avoid paying stamp duty
B. To outperform the stock market
C. To qualify for government housing grants
D. To generate rental income and capital appreciation

5. What is the minimum Interest Coverage Ratio (ICR) set by the PRA for BTL mortgages?

A. 125%
B. 100%
C. 150%
D. 200%

6. What distinguishes a "consumer buy-to-let" (CBTL) mortgage from a standard BTL mortgage?

A. It is used for business purposes only
B. It is regulated by the FCA
C. It requires no affordability checks
D. It is only available to high-net-worth individuals

7. Who qualifies as a high-net-worth customer under FCA rules?

A. Someone with £100,000 annual income
B. Someone with a credit score above 800
C. Someone with £300,000 annual income or £3m net assets
D. Someone owning more than five properties

8. What defines a "professional customer" in mortgage lending?

A. A borrower with a university degree
B. A borrower who works in a profession
C. A borrower who earns over £50,000 annually
D. Someone working in the home finance sector with relevant expertise

9. What is the role of a personal representative in mortgage lending?

A. To manage the estate of a deceased borrower
B. To act as a guarantor for the borrower
C. To negotiate lower interest rates with lenders
D. To oversee the mortgage application

10. What is a power of attorney in mortgage transactions?

A. A type of mortgage insurance
B. A legal document allowing someone to manage another’s financial affairs
C. A requirement for joint borrowers
D. A government subsidy for first-time buyers

11. What must lenders verify before lending to trustees?

A. The beneficiaries’ credit scores
B. The trustees’ personal income
C. That the trust deed permits borrowing
D. The property’s rental potential

12. When is a mortgage for business purposes regulated under MCOB?

A. If secured on commercial property only
B. If the borrower is a limited company
C. If the loan exceeds £1 million
D. If secured on a property where ≥40% is residential and for a small business

13. In a business partnership, how are mortgage liabilities typically structured?

A. Partners are jointly and severally liable
B. Only the managing partner is liable
C. Liability is split equally regardless of profit share
D. The partnership itself is solely liable

14. What is a key feature of a Limited Liability Partnership (LLP)?

A. Partners have unlimited personal liability
B. The LLP is a separate legal entity from its partners
C. Mortgages to LLPs are always regulated
D. LLPs cannot borrow additional funds

15. What is a Special Purpose Vehicle (SPV) commonly used for?

A. Holding personal savings
B. Reducing stamp duty liability
C. Managing business property through a separate legal entity
D. Avoiding credit checks

16. What must lenders check in a partnership agreement before approving a mortgage?

A. The partners’ personal spending habits
B. The partnership’s business plan
C. The partners’ family connections
D. Whether the partnership can borrow and how contracts are signed

17. Which type of borrower is typically exempt from standard affordability checks?

A. High-net-worth customers
B. Commercial borrowers
C. Buy-to-let investors
D. Retirees

18. What is the FCA’s threshold for defining a high-net-worth individual’s net assets?

A. £1 million
B. £3 million
C. £5 million
D. £10 million

19. What is the "stress ICR" in BTL lending?

A. A test of rental demand in a given area
B. A penalty for late mortgage payments
C. A test using an interest rate 2% above the actual rate to assess affordability
D. A tax on high-value properties

20. Who is an "accidental landlord" likely to be?

A. Someone who became a landlord due to insurance payout
B. A borrower with no prior rental experience
C. A landlord who has property accident cover
D. Someone letting a property due to unforeseen circumstances

21. What is required for a CBTL mortgage to be regulated?

A. The purpose must not be "wholly or predominantly" for business
B. The borrower must own multiple properties
C. The property must be commercial
D. The loan must exceed £500,000

22. What is a key difference between an LLP and a general partnership?

A. LLPs have no legal separation from partners
B. Partners in an LLP have limited liability
C. LLPs cannot place funds in trust
D. General partnerships are always regulated

23. What must a lender confirm before lending to a club or association?

A. The club’s business plan
B. The members’ personal credit histories
C. That the club’s constitution permits borrowing
D. The club’s profit margins

24. What is the executor’s role in Scotland if no will exists?

A. Executor-nominate
B. Trustee
C. Power of attorney holder
D. Executor-dative

25. What is a lender’s primary concern when assessing a business borrower’s mortgage?

A. Whether the business can support repayments
B. Whether the business is eligible for government grants
C. The borrower’s age
D. That the property is multipurpose