CeMAP Mortgage Products and Repayments 2

Question 1

How does a tracker mortgage differ from a standard variable rate (SVR) mortgage?

Accepted Answer

A tracker follows the Bank of England base rate by a set margin, while SVR is set at the lender's discretion

Answer

A tracker follows the lender's own base rate

Answer

There is no difference — they are the same product

Answer

A tracker rate can never go below 0%

Question 2

What is an offset mortgage and what advantage does it offer the borrower?

Accepted Answer

A mortgage linked to a savings account where savings reduce the balance on which interest is calculated

Answer

A mortgage where repayments are deferred for the first year

Answer

A mortgage with payments offset to the end of the month

Answer

A mortgage where the interest rate is offset against inflation

Question 3

What is a capped rate mortgage?

Accepted Answer

A variable rate mortgage with a ceiling above which the interest rate cannot rise during the capped period

Answer

A mortgage with a maximum amount that can be borrowed

Answer

A mortgage that caps monthly payments regardless of rate changes

Answer

A fixed-rate mortgage with a maximum term

Question 4

What is a repayment mortgage and how does it ensure the loan is fully repaid?

Accepted Answer

Monthly payments include both interest and capital, gradually reducing the balance to zero over the term

Answer

Monthly payments cover interest only with a lump sum at the end

Answer

The property is sold at the end to repay the loan

Answer

Repayments increase annually by the rate of inflation

Question 5

What is a flexible mortgage and what features does it typically include?

Accepted Answer

A mortgage allowing overpayments, underpayments, payment holidays, and drawdown of overpayments

Answer

A mortgage that allows the borrower to change lenders at any time

Answer

A mortgage with a flexible interest rate

Answer

A mortgage with no fixed term

Question 6

What is the difference between a discounted rate mortgage and a fixed rate mortgage?

Accepted Answer

A discount is a set reduction from the lender's SVR (so the rate can move), while a fixed rate stays constant for the agreed period

Answer

There is no significant difference

Answer

A discounted rate is always lower than a fixed rate

Answer

A fixed rate has no early repayment charges