What is meant by Securitisation
The process by which a mortgage lender sells mortgage contracts to a third party in exchange for a cash sum. This takes the mortgage off the lender’s balance sheet and gives the lender more cash to invest. The buyer receives all the capital and interest payments due on the mortgage but also carries all the risk.
What is meant by Recession
A significant decline in a country’s economic activity, usually defined as a decline in gross domestic product (GDP - the value of all the goods and services produced within a country) for TWO successive quarters, ie six months.
What is meant by inflation
The decrease in the spending power of money over a specified period of time, usually 12 months, as measured by the Consumer Prices Index (CPI).
What issues affect the mortgage market?
- Intrest rates
- Inflation
- The Economy
- Supply & Demand
- Government Action
- Non Property Funding.
Basis point
One-hundredth of 1%.
What Effects interest rates?
- Level of government borrowing
- Foreign Interest Rates
- Monetary Policy
- Higher levels of individual borrowing
Does house price inflation run ahead of general inflation. Yes/No
Yes
What is the rate that the BOFE lends to other financial institutions?
The rate at which the Bank of England lends to other financial institutions is known as the Bank rate. It is also sometimes called the base rate. The interbank rate is the rate at which banks lend to each other, which is the sterling overnight index average (Sonia).
Credit Crunch
A financial situation where banks reduce lending significantly due to increased risk, leading to a slowdown in economic activity and making it difficult for businesses and consumers to obtain loans.
What effects the mortgage market
- Interest Rates
- The economy
- Supply & Demand
- Government Action
- Non Property Funding
- Inflation
Which of the following is true in relation to inflation?
a) General inflation tends to run at a higher rate than house-price inflation.
b) The Monetary Policy Committee’s inflation target is based on the Consumer Prices Index.
c) Any level of inflation is considered to be bad for the economy.
