Route to CAS Knowledge Test

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Question 1

Which of the following would be most likely to be considered a credible repayment strategy for an interest only mortgage?

Planning to use a promised inheritance from a relative.

Relying on the increase in value of the property to provide equity that can be released to pay off the loan.

Using the proceeds from the sale of another property owned by the borrower.

Using a pension commencement lump sum to pay off the loan.

Question 2

How would an advisor justify a mortgage term to a customer?

The adviser asks what the customer wants and proceeds on that basis without review

The adviser completes a full affordability assessment based on the income/ outgoings and circumstances and agree an appropriate budget for that client. The adviser adjusts the term to reflect these needs.

The adviser assumes everyone wants a 25 year term and proceeds on that basis

The adviser recommends the maximum term available from the lender.

Question 3

As an adviser, when dealing with a ‘Mortgage Prisoner’ who wishes to remortgage what is the best course of action

Do nothing they have to stay on lenders SVR

Refer them back to their current lender

Refer them to Citizens Advice Bureau

Remortgage them to a new lender

Question 4

If there Is no contract suitable for the customers needs and circumstances within the range available to the firm, the adviser should not make a recommendation.

True

False

Question 5

John is 55 years and is seeking a 20 year repayment mortgage. The lenders affordability must only take into account his financial position at the time of the application.

True

False

Question 6

It is not necessary to establish a attitude to risk when advising on a mortgage because there is no investment exposure.

True

False

Question 7

When completing a fact find with a client which of the following are examples of subjective facts:

Current Occupation

Where source of deposit has been raised from

Plan to move home in 5 years time

Believe interest rates will fall next year

Question 8

When assessing a clients affordability for mortgage purposes which of the following are classed as basic essential expenditure

Weekly food costs

Sky TV Subscription

Council tax bill

Hire purchase repayments

Question 9

Which of the following is a contributing factor to the difficulties experienced by people seeking to buy their first home?

Rising property prices

Falling property prices

A growing economy

A declining economy

Question 10

Who sets the Interest rates?

The Government

Bank of England’s Monetary Policy Committee (MPC).

A chosen team of Banking Executives

The King

Question 11

Which of the following is not a chapter of MCOB?

Application and purpose

Training and Competence

Financial Promotions

Further Advances

Question 12

Which of the following would be considered as a regulated Consumer Buy To let ? Tick all that apply if relevant

A son inherits his parents’ house. He has his own property but does not wish to sell his parents’ house yet because the market is poor. In the meantime, in order to cover the costs of maintenance, etc, he decides to rent it out.

A developer has purchased a commercial retail premises that has a flat above and decides to let out the flat on a residential basis.

A couple have moved to another area to work but have been unable to sell their house. In order to cover the cost of maintenance, etc, they have decided to rent it out while they settle nearer to work and perhaps buy another property in the area

A couple divorce and one party decides to use the proceeds from the sale of the family home to purchase a property to let out as he/she have moved into a property owned by their new partner.

Question 13

What are the main facts about a mortgage product which must be explained in an ESIS

The price the customer will pay including fees

The length of time the ESIS is valid for

How much the lender is prepared to lend the customer based on affordability

The key features of the mortgage

Question 14

Brian has purchased a three-storey property with the help of a mortgage. Two floors provide office accommodation, and the top floor is a two-bedroomed flat. Is the mortgage regulated

Yes

No

Question 15

Regulated Mortgages of less than £25,000 on residential property are regulated under the Consumer Credit Act 1974 & 2006

Yes

No

Question 16

Which one of the following would NOT usually be a standard condition to an offer of mortgage advance but would only be added when circumstances required? :

Subject to consent to mortgage form

Subject to satisfactory title

Subject to acceptance before specified expiry date

Property must offer vacant possession

Question 17

What is the legal status of an offer of advance from a mortgage lender?

It is legally binding on the lender

Once accepted it is legally binding on the lender and borrower

It is a contract between the lender and the borrower

It describes the terms and conditions that will form the basis of a contract

Question 18

Which one of the following is FALSE of the lender’s rights related to a legal charge? The lender can:

insure the property

call in a mortgage only if the account is in arrears

charge the borrower for the cost of meeting local authority requirements

transfer the mortgage to another institution only with the borrower’s permission

Question 19

Why is it important to stress to a first-time buyer that his mortgage loan will be secured against their main residence?

Gains on the property are only exempt from Capital Gains Tax if the mortgage is secured against the property

The purchase is only exempt from Stamp Duty Land Tax when the loan is secured against the property

If they fail to maintain the mortgage loan repayments, they could lose their home

If they fail to maintain the mortgage loan repayments, they will be unable to declare themselves bankrupt

Question 20

Which types of Home Finance are regulated

Consumer Buy To Let Mortgages

2nd Charge on a Buy to Let mortgage

Commercial Loan

Further Advance on main home

Question 21

Harry tells Adam that property usually offers a good return but does not mention specific products or lenders. Under MCOB Advice rules would this constitute advice

Yes

No

Question 22

Cathy has a capital repayment mortgage of £250,000 over a 30 year term. The interest rate is 4.5 per cent on an annual rest basis and her monthly repayment is £1266 (to the nearest whole pound). Calculate how much of the capital she will repay in the first year.

£4032

£3942

£11250

£4320

Question 23

Gordon wishes to arrange an interest only mortgage to buy his new property. Which of the following repayment strategies would be most unlikely to be acceptable to the lender?

An ISA funded monthly

Allocating his quarterly bonus payments to reduce the capital balance

A potential inheritance as a beneficiary of his 75 year old aunts will

A unit-linked endowment policy

Question 24

Which of the following is excluded from the APRC calculation?

Valuation fees.

Higher lending charges

Redemption charges for sealing the mortgage deed

Early repayment charges

Question 25

James aged 59 has entered into an arrangement with a lender who has given him a mortgage that must be repaid only when he moves out, goes into care or dies. What type of arrangement could he have.

Retirement Interest Only Mortgage (RIO)

A Lifetime Mortgage

Home Reversion Plan

Buy to Let Mortgage

Question 26

Capital Repayment Mortgages offer borrowers the possibility of a capital surplus at the end of the term

True

False

Question 27

A ‘second charge mortgage’ is a further loan from the original lender.

True

False

Question 28

Which mortgage interest rates option involves payment of interest at a rate that is always below the lender standard variable rate (SVR) and may carry penalties if the mortgage is repaid early?

Fixed rate

Discounted rate

Tracker Rate

Variable rate

Question 29

Which of the following is true of a further advance?

It must finish at the same time as the mortgage

The same loan to value limit with apply, regardless of the purpose of the further advance

The existing mortgage must usually be in place for at least 6 months

The lender will not need to reassess the property as security, as it would have been valued for the original mortgage

Question 30

In relation to a further advance on an existing MCD regulated mortgage, in order to comply with MCOB, the lender must provide the borrower with:

an illustration based on the further advance only

an ESIS based on the further advance only

an ESIS based on the total borrowing

an illustration based on the total borrowing

Question 31

Which of the following is untrue in relation to MCOB rules and second charges? Tick all that apply

MCOB rules apply to new and existing second charge loans, regardless of when they started

When arranging a new second charge loan, the lender must provide the borrower with a KFI and an ESIS

The lender must provide a suitability report to give an adequate explanation of the product.

A second charge loan of £30,000 secured on the borrower’s home for business purposes would not be subject to MCOB.

Question 32

In order to provide information about the firm, its services and its charges, which of the following documents must be given to a client when giving advice on regulated mortgage products?

Privacy Notice

Fee Agreement

An ESIS

Firms IDD Initial disclosure document

Question 33

Which category of lending became regulated under MCOB following implementation of the Mortgage Credit Directive in 2016

Second Charge Mortgages

Buy To Let

Equity Release Mortgages

Retirement Interest Only Mortgages (RIOs)

Question 34

What are the main aims of the FCA (tick all that apply)

Protect consumers

Preserve the integrity of the financial services industry

Dealing with queries from Advisers

Protect Advisers

Question 35

Which of the following is NOT a key component of the FCA Consumer Duty?

Right to receive products and services that meet consumer needs

Right to receive products and services that perform as expected

Right to receive products and services at discounted prices

Right to receive products and services from firms that provide an appropriate level of care and service

Question 36

What is the newest FCA Principle implemented in July 2023 ?

Treating Customers Fairly

A firm must act to deliver good outcomes for retail customers

Skill Care & Diligence

Customers Interests

Question 37

Which of the following is not an example of application fraud

An applicant who inflates or falsifies their income

An applicant who states they intend to live in the new property they are purchasing

An applicant who deliberately fails to disclose a previous address or CCJ

An applicant who impersonates another person after obtaining personal information about them.

Question 38

When reviewing a clients payslips as part of a fact finding meeting which of the following situations should you be most concerned about when it comes to mortgage fraud.

NHS payslip with an employee number of 1.

Client employed by family business with payslips where net monthly income matches income on bank statement

An electronic payslip

Change in format of payslip but all details match other records

Question 39

If you suspect mortgage / application fraud what should you do

Tell the client why you cannot proceed with application

Report to the lender

Report to Rockstone Compliance

Do Nothing

Question 40

Karen wants to complain about the treatment she received from her mortgage adviser. She has been unable to achieve a satisfactory resolution using the firm’s internal complaints process. She has decided to take the matter to the next formal stage of the complaints process. To which body should she refer her complaint to in order to get a binding decision?

Financial Conduct Authority

The mortgage lender

Financial Ombudsman

A solicitor