Unit 3 Sustainability of an Individual s Finances (SIF) L / 504 / 8166

Transcription

1 Level 3: Diploma in Financial Studies (DipFS) 600 / 8551 / 4 Unit 3 Sustainability of an Individual s Finances (SIF) L / 504 / 8166 Mark scheme The mark scheme below provides guidance to assessors / examiners by identifying different levels of response, which will assist the assessor / examiner in identifying the range of marks available for the candidate s attempt. The achievement level descriptors indicated do not make reference to the levels within the Regulated Qualifications Framework. (The Diploma in Financial Studies is at Level 3 within the RQF and thus a student passing the overall qualification will have attained a Level 3 qualification.) Individual mark allocations are identified within the achievement level descriptors but candidates are required to achieve the overall standard of the work required by that descriptor before they can gain any individual marks from the descriptor. The mark scheme identifies many relevant and appropriate answers students are not expected to provide all of these. The tables containing the achievement level descriptors identify the extent of student achievement required for the award of marks. The suggested answer list is not exhaustive and any additional valid answers should be accepted. The Chief Examiner has provided these illustrative / suggested answers for the benefit of new assistant examiners who have joined the team and for those who have limited knowledge of these qualifications. With regard to recommendations of appropriate products in some questions, there is not expected to be a right choice. Marks can be awarded, as indicated, where the recommendation is justified in the context of the student s answer. The London Institute of Banking & Finance is a registered charity, incorporated by Royal Charter.

2 MARKING INSTRUCTIONS 1. All scripts must be marked in accordance with the mark scheme 2. Marks awarded must relate directly to the marking criteria 3. Where a candidate has crossed out a response and provided a clear alternative, the crossed out response must not be marked. 4. For answers marked by levels of response: To determine the level start at the highest level and work down until you reach the level that matches the answer To determine the mark within the level consider the following in the table below: Descriptor Award mark On the borderline of this level and At bottom of level the one below Just enough achievement on Above bottom and either below middle or at middle balance for this level of level (depending on number of marks available) Meets the criteria but with some Above middle and either below top of level or at slight inconsistency middle of level (depending on number of marks available) Consistently meets the criteria for At top of level this level Be prepared to use the full range of marks available for each question. 5. Annotations RULES FOR THE USE OF ANNOTATIONS IN WRITTEN EXAMINATIONS (CeFE, CeFS, DipFS) Annotations have been introduced so that when centres request a copy of a candidate s script they are able to see the rationale behind the mark given. Scripts are returned to schools on an on demand basis, and as such, it is vital that the rules below are applied consistently and comprehensively so that they are as helpful as possible to the intended reader. Please note that these annotations are not for LIBF use, or for any form of verification procedure by the Chief Examiner or Team Leaders. The following rules also apply with regard to the entering of mark breakdowns in the comments box and MUST be adhered to. Page 2 of 26

3 Rules for the use of annotations Annotations must be used on all parts being marked. This includes identify / state / calculate questions as the list now includes correct and incorrect for use on these types of questions The Levels used must be appropriate to the mark given as per the level descriptors. Please check the Level used against the mark given and the level descriptors provided in the mark scheme Annotations must be applied accurately in line with the command word used and the marks awarded. This is very important as scripts are requested for use in schools Ticks must not be used at all for calculate and identify questions please use the annotations provided in the list above Underlining may be used to highlight key points in a response but must also be accompanied by a relevant annotation Do not use free text / comments in the comments box as these will be removed from the script The comments box must be reserved for keying in the marks of parts of questions where there are at least two separate parts to the question (e.g. a, b, c etc) Annotations must not be entered into the comments box they are to be placed at the appropriate point in the response Pre-defined annotations The table below provides guidance as to which annotations should be used with which command words. A list of the command word definitions also follows. ANNOTATION RELEVANT COMMAND WORD Too vague Benefit of doubt Repetition Not relevant Any Any Any Any Page 3 of 26 Turn over

4 Recommendation / conclusion shown No recommendation / conclusion Level 0 Level 1 Level 2 Level 3 Limited Good Very good Correct Incorrect Good comparison No comparison Not referring to the case study Not following the command word Discuss / evaluate Discuss / evaluate Any Any Any Any Any Any Any Identify or state / calculate Identify or state / calculate Compare Compare Any for the case study questions only Any Underlining All Page 4 of 26

5 Command word definitions COMMAND WORD L2 USE L3 USE WHAT DOES IT MEAN? Analyse - x Compare - x Break an issue into parts. Look in depth at each part using supporting arguments and evidence for and against as well as how these relate to one another Identify and explain the similarities and differences between two or more phenomena (facts), using connective or joining words to link the facts. Say if any of the shared similarities or differences are more important than others Define x - Give a brief explanation of exactly what something means Describe x x Discuss - x Evaluate - x Explain x Provide a detailed explanation of the main features of something and how and why something happens This is a written debate using skill at reasoning, backed up by carefully selected evidence to make a case for and against an argument, or point out the advantages and disadvantages of a given context. The response should include a conclusion which sums up the main points being discussed, weighs up the advantages and disadvantages and benefits and drawbacks of what is being considered, and comes to a decision or recommendation that is fully and logically supported. Give a verdict as to what extent a statement or findings within a piece of research are true, or to what extent you agree with them. Provide evidence which both agree and contradict an argument. Come to a conclusion which sums up the main points being discussed, weighs up the advantages and disadvantages and benefits and drawbacks of what is being considered, and fully and logically justifies how you have made your choice or decision. Clarify a topic by giving a detailed account as to how and why it occurs, or what is meant by the use of the term in a particular context. Justify with relevant evidence Calculate x x To solve a mathematical problem using the information provided List / State / Identify Suggest x - x x To create a list of a specified number of key points. To specify in clear terms the key aspects relating to a topic without being descriptive State a possible reason or course of action (no development required) Outline x To give the main features of something rather than emphasising minute detail To what extent x Evokes a similar response to questions containing 'how far'. This type of question calls for a thorough assessment of the evidence in presenting your argument. Page 5 of 26 Turn over

6 MARK SCHEME CASE STUDY 1 ADDITIONAL INFORMATION Credit rating and blacklisting Steve found out that there is no such thing as a credit blacklist. There are, however, credit scoring reports, supplied by Equifax and Experian. Individuals have a particular credit rating and this can affect the interest rate charged on their loan. A person s credit rating is important because each financial services provider will assess an application for a loan using credit scoring. Each piece of information provided on the application form is given a score which is then added up to decide if a person is to be given a loan and, if so, what the maximum amount is that the lender is prepared to advance and the rate of interest that will be charged. Steve does not know what his credit rating is. Case study questions 1.1 Discuss what Steve will need to consider regarding his personal financial plans in the short term, in light of his debt management. (10 marks) Command word definition: Discuss This is a written debate using skill at reasoning, backed up by carefully selected evidence to make a case for and against an argument, or point out the advantages and disadvantages of a given context. The response should include a conclusion which sums up the main points being discussed, weighs up the advantages and disadvantages and benefits and drawbacks of what is being considered, and comes to a decision or recommendation that is fully and logically supported. Page 6 of 26

7 Achievement level descriptors: Level Marks 0 0 No relevant discussion A limited attempt to discuss. The answer is rather descriptive and does not address what Steve will need to consider. There is no explicit reference to Steve and his circumstances A good attempt to discuss. There is some attempt to offer a discussion and to address what Steve will need to consider, but there is no clear and explicit conclusion. Explicit reference to Steve and his circumstances is required A very good attempt to discuss. There is a very good attempt to offer a discussion and there is a very clear focus on what Steve will need to consider. There is a clear and explicit conclusion. Explicit reference to Steve and his circumstances is required. Steve will need to: establish clear, measurable objectives; draw up a budget; create a cash-flow plan; change his attitudes to financial planning (saving rather than spending); keep an accurate record of the plan and monitor performance; adapt and amend the plan; identify items of discretionary spending that can be reduced (new technology products, going out); look for opportunities to increase income (overtime in the supermarket); change his medium-term (going on holiday) and long-term plans to match his new circumstances. Page 7 of 26 Turn over

8 1.2 Analyse to what extent further borrowing is likely to impact on Steve s financial footprint. (10 marks) Command word definition: Analyse Break an issue into parts. Look in depth at each part using supporting arguments and evidence for and against as well as how these relate to one another Achievement level descriptors: Level Marks 0 0 No relevant analysis A limited attempt to analyse. The answer is rather descriptive and does not address the to what extent element of the question. There is no explicit reference to Steve and his circumstances A good attempt to analyse. There is some attempt to offer a discussion and to address the to what extent element of the question, but there is no clear and explicit conclusion. Explicit reference to Steve and his circumstances is required A very good attempt to analyse. There is a very good attempt to offer a discussion and there is a very clear focus on the to what extent element of the question. There is a clear and explicit conclusion. Explicit reference to Steve and his circumstances is required. Analysis could include, but not be limited to, the following: Borrowing can be a viable option as long as it is part of a plan. If he starts making regular payments and his debt decreases, this will improve his financial footprint. Need to be aware of exactly how much is being borrowed and only what Steve needs to cover the high interest debts he has. Page 8 of 26

9 Ensure he pays more than the minimum payment each month to steadily reduce his debt. Ensure payments are on time. It may not be possible to keep up with payments; this can have a negative effect on a financial footprint. Applying for too many borrowing products can be a problem, so he needs to pay off one of his cards completely and close the account. Getting close to a credit limit can be a problem. Debts will stay on a person s credit file for six years, so Steve needs to realise he must change his lifestyle over a long period in order to put things right. 1.3 Steve has considered the solutions in the research. Evaluate how useful the following solutions are for him: A debt relief order, an individual voluntary agreement and a debt consolidation loan. (15 marks + 5 SPAG) Evaluate Give a verdict as to what extent a statement or findings within a piece of research are true, or to what extent you agree with them. Provide evidence which both agree and contradict an argument. Come to a conclusion which sums up the main points being discussed, weighs up the advantages and disadvantages and benefits and drawbacks of what is being considered, and fully and logically justifies how you have made your choice or decision. Achievement level descriptors: Level Marks 0 0 No relevant evaluation A limited attempt to evaluate how useful the solutions are for Steve. There will be a limited understanding of the products and their features and there will be no, or very few, examples to illustrate this. There is no explicit reference to Steve and his circumstances. Page 9 of 26 Turn over

10 A good attempt to evaluate how useful the solutions are for Steve. There will be a reasonably good understanding of the products. Suitable examples are included. Any conclusion may not be explicit. Explicit reference to Steve and his circumstances is made but may not be developed A very good attempt to evaluate how useful the solutions are for Steve. There will be a very good understanding of how useful the solutions are to Steve. Several suitable examples are included. There is a clear and explicit conclusion. Explicit reference to Steve and his circumstances is required. The evaluation may include but will not be limited to: Debt relief order (DRO) Benefits A debt relief order can be a low cost alternative to bankruptcy as his debt is relatively small. A debtor doesn t pay anything towards their debts for 12 months and after that the debts will be written off. Steve has had his debts for a while, so having a finish point in sight could be a motivator to pay off as per any agreements. Creditors can't pursue the debtor for their debts during the 12-month period. Again, this could be a relief for Steve, although we don t know if he has been pursued so far. Although a DRO is a formal debt solution, a debtor doesn t need to appear in court. Risks A DRO is only available if a debtor owes less than 20,000 and lives in England, Wales or Northern Ireland. Steve currently owes around 6,000 so this would be suitable. Debtors need to pay the Insolvency Service a one-off fee of 90. A debtor can't apply if they are a homeowner. Steve rents, so this is suitable for him. A DRO will appear on a public register and will affect his credit report negatively. Individual voluntary agreement (IVA) Page 10 of 26

11 Benefits If a debtor meets the requirements for the full term of the IVA, their debts are classed as discharged. We know that Steve has a poor attitude to money, so this might be good, but he won t get a new unsecured loan. Additional fees can be added to the IVA agreement so adds to Steve s debt. Large personal property can be excluded from the agreement and therefore is not at risk. Debts are frozen during the period of the IVA which stops his old debt getting worse, but his lifestyle will have to change so that he doesn t get into new debt. Risks Creditors have to agree to the IVA. Steve has a few large debts so that might be something that would be agreed to. It is legally binding and has to be set up by a licensed insolvency practitioner. Additional fees need to be paid to the court and for setting up the IVA, which will add to Steve s debt, but they will be discharged after the IVA is finished. A debtor cannot take out new unsecured loans. As he is still young, this might be a real problem in the future. Debt consolidation loan Benefits He can choose which debts to pay off soonest, so the credit cards with the highest rates could go first. He doesn t need the agreement of his creditors, so Steve remains in charge, but he s not proved himself recently with regards to his financial control. He will only have to manage a single monthly payment, rather than all of his credit cards and council tax payments. But it will not be worth it if he doesn t change his lifestyle. He will stop paying late fees and additional interest charges. Over time he will improve his credit rating. Risks Steve s credit history will be poor by now and he may not be able to get any loan even a consolidation loan. Page 11 of 26 Turn over

12 The interest could be higher than personal loans (but lower than credit card charges, and overdraft charges and fees). Risk of losing your assets if you do not keep up with the new repayments. Steve doesn t have a lot, so this might not be a concern. Nothing to stop him getting into more debt. SPAG (Spelling, Punctuation and Grammar) PLEASE KEEP IN MIND THAT THIS IS A LEVEL 3 QUALIFICATION AIMED AT YEAR OLDS Performance Level Marks 0 0 Errors severely hinder the meaning of the response, and/or candidates do not spell, punctuate or use the rules of grammar within the context of the demands of the question at the appropriate level. Threshold Performance Intermediate Performance Candidates spell, punctuate and use the rules of grammar with reasonable accuracy within the context of the demands of the question at the appropriate level. Any errors do not hinder an understanding of the meaning in the response. Where required, they use a limited range of specialist terms appropriately Candidates spell, punctuate and use the rules of grammar with considerable accuracy within the context of the demands of the question at the appropriate level. Where required, they use a Page 12 of 26

13 good range of specialist terms appropriately. High Performance 3 5 Candidates spell, punctuate and use the rules of grammar with consistent accuracy within the context of the demands of the question at the appropriate level. Where required, they use a wide range of specialist terms adeptly and with precision. Note: Written communication covers: clarity of expression, structure of arguments, presentation of ideas, grammar, vocabulary, punctuation and spelling. It is important that answers are placed in the appropriate level for a Level 3 qualification. Where handwriting may make it difficult to see if spelling, punctuation and grammar are correct, examiners must make every effort to assess SPAG fairly and if they genuinely cannot make an assessment, the team leader must be consulted. Specialist terms do not always require the use of complex language but the vocabulary used should be appropriate to the subject, question and qualification level. Examiners are asked to consider the marking criteria the following way: - How well does the response communicate the meaning? - What range of specialist terms is used? - How accurate is the spelling, punctuation and grammar? Page 13 of 26 Turn over

14 MARK SCHEME CASE STUDY 2 ADDITIONAL INFORMATION Sainsbury s Bank stresses the long history of the firm dating back to the opening of its first store in It also stresses its commitment to corporate responsibility: Our values make us different and we are our guiding principles, from where we source our products and how we work in our local communities to reducing our carbon footprint across the business. (Source: Sainsbury s website, Case study questions 2.1 Discuss how Sean will monitor his personal budget while he plans for and takes his break to travel, and how he will monitor the variances. (10 marks) Command word definition: Discuss This is a written debate using skill at reasoning, backed up by carefully selected evidence to make a case for and against an argument, or point out the advantages and disadvantages of a given context. The response should include a conclusion which sums up the main points being discussed, weighs up the advantages and disadvantages and benefits and drawbacks of what is being considered, and comes to a decision or recommendation that is fully and logically supported. Achievement level descriptors: Level Marks 0 0 No relevant discussion. Page 14 of 26

15 1 1 4 A limited attempt to discuss. The answer is rather descriptive and does not address the question. There is no explicit reference to Sean and his circumstances A good attempt to discuss. There is some attempt to offer a discussion and to address the question, but there is no clear and explicit conclusion. Explicit reference to Sean and his circumstances is required A very good attempt to discuss. There is a very good attempt to offer a discussion and there is a very clear focus on the question. There is a clear and explicit conclusion. Explicit reference to Sean and his circumstances is required. The discussion regarding Sean will include but not be limited to the following things he may need to do: Establish clear, measurable objectives this could include all the big expenses and set the maximum he has to spend. Draw up a budget and a cash-flow plan this would have to be based on the costs of getting to and travelling around the countries he is visiting and a spending allowance per visit per day. Keep an accurate record of the plan and monitor performance he is likely to need to have access to his bank account details and balance while travelling he should check with his bank if he can download an app that helps. Adapt and amend the plan if it looks as if he is going to fall short of cash. Establish a contingency this could be an emergency fund or someone he could contact only in an emergency to transfer money to his online account. Sean should check the costs of using a card abroad against the costs of buying local currency. Page 15 of 26 Turn over

16 2.2 Discuss to what extent a decision by Sean to take out a mortgage in the future could be regarded as an example of a good debt. (10 marks) Command word definition: Discuss This is a written debate using skill at reasoning, backed up by carefully selected evidence to make a case for and against an argument, or point out the advantages and disadvantages of a given context. The response should include a conclusion which sums up the main points being discussed, weighs up the advantages and disadvantages and benefits and drawbacks of what is being considered, and comes to a decision or recommendation that is fully and logically supported. Achievement level descriptors: Level Marks 0 0 No relevant discussion A limited attempt to discuss. The answer is rather descriptive and does not address the to what extent element of the question. There is no explicit reference to Sean and his circumstances A good attempt to discuss. There is some attempt to offer a discussion and to address the to what extent element of the question, but there is no clear and explicit conclusion. Explicit reference to Sean and his circumstances is required A very good attempt to discuss. There is a very good attempt to offer a discussion and there is a very clear focus on the to what extent element of the question. There is a clear and explicit conclusion. Explicit reference to Sean and his circumstances is required. Page 16 of 26

17 Areas that students could include in their answers as an argument that a mortgage is a good debt for Sean include, but are not limited to: The benefits of debt, including being able to buy something that is otherwise inaccessible, being able to finance mismatched timing of income and payments, and being able to invest in something that gains value. Houses generally increase in value Sean will have an asset that he can sell or pass on. He doesn t at present as he rents. Help to buy scheme reduces risk and would be appropriate for Sean. Otherwise he might find it difficult to get a mortgage as banks are less willing to risk mortgages to some people. The costs of debt, including the interest payments might be variable and risky for Sean he will have insurance products that he will have to buy also. Different people s different attitudes to debt and how these can change over time. Sean s financial footprint will enlarge but his credit rating will improve as long as he maintains his payments. Will Sean s salary be enough by himself? Sean will have to be aware of the dangers of getting into debt and how to manage problems, ranging from debt management options through to bankruptcy. It will be the first long term financial commitment for Sean and he may need support from his provider to maintain payments and purchase the right product. 2.3 Evaluate the impacts of ethical considerations for Sean when choosing a loan provider. (15 marks + 5 SPAG) Command word definition: Evaluate Give a verdict as to what extent a statement or findings within a piece of research are true, or to what extent you agree with them. Provide evidence which both agree and contradict an argument. Come to a conclusion which sums up the main points being discussed, weighs up the advantages and disadvantages and benefits and drawbacks of what is being considered, and fully and logically justifies how you have made your choice or decision. Page 17 of 26 Turn over

18 Achievement level descriptors: Level Marks 0 0 No relevant evaluation A limited attempt to evaluate what is important for Sean to consider. There will be a limited understanding of ethical considerations and there will be no, or very few, examples to illustrate this. There is no explicit reference to Sean and his circumstances A good attempt to evaluate what is important for Sean to consider. There will be a reasonably good understanding of ethical considerations. Suitable examples are included to illustrate this. There is no clear and explicit conclusion. Explicit reference to Sean and his circumstances is required A very good attempt to evaluate what is important for Sean to consider. There will be a very good understanding of ethical considerations. Several suitable examples are included to fully illustrate and explain this. There is a clear and explicit conclusion. Explicit reference to Sean and his circumstances is required. Evaluation will include but is not limited to: He has demonstrated a commitment to high-quality services to customers and will look for providers service statistics reports (probably in a CSR report) and how they are helping customers who get into financial difficulties. Price and length should match the needs of the borrower and so Sean will want a provider that has the expertise to match products with his needs a not insignificant amount of money to be paid back over a relatively short period of time. He may want to consider the provider s performance under the following headings: o Environmental ethics. o Product sustainability. o Political. One example of ethical operations in the financial sector is the paperless bank account, but this is so common place that Sean will need to dig deeper to find out the really innovative activities the providers engage in. Examples could include the following: Page 18 of 26

19 o Text alerts to customers whose accounts are about to become overdrawn. o Marketing campaigns can also be delivered electronically, offering the customer instant access to more information. Individuals must manage their finances in a sustainable way so that they can pay for all of the things that they need without becoming over-indebted. Page 19 of 26 Turn over

20 SPAG (Spelling, Punctuation and Grammar) PLEASE KEEP IN MIND THAT THIS IS A LEVEL 3 QUALIFICATION AIMED AT YEAR OLDS Performance Level Marks 0 0 Errors severely hinder the meaning of the response, and/or candidates do not spell, punctuate or use the rules of grammar within the context of the demands of the question at the appropriate level. Threshold Performance Intermediate Performance High Performance Candidates spell, punctuate and use the rules of grammar with reasonable accuracy within the context of the demands of the question at the appropriate level. Any errors do not hinder an understanding of the meaning in the response. Where required, they use a limited range of specialist terms appropriately Candidates spell, punctuate and use the rules of grammar with considerable accuracy within the context of the demands of the question at the appropriate level. Where required, they use a good range of specialist terms appropriately. 3 5 Candidates spell, punctuate and use the rules of grammar with consistent accuracy within the context of the demands of the question at the appropriate level. Where required, they use a wide range of specialist terms adeptly and with precision. Page 20 of 26

21 Note: Written communication covers: clarity of expression, structure of arguments, presentation of ideas, grammar, vocabulary, punctuation and spelling. It is important that answers are placed in the appropriate level for a Level 3 qualification. Where handwriting may make it difficult to see if spelling, punctuation and grammar are correct, examiners must make every effort to assess SPAG fairly and if they genuinely cannot make an assessment, the team leader must be consulted. Specialist terms do not always require the use of complex language but the vocabulary used should be appropriate to the subject, question and qualification level. Examiners are asked to consider the marking criteria the following way: - How well does the response communicate the meaning? - What range of specialist terms is used? - How accurate is the spelling, punctuation and grammar? Page 21 of 26 Turn over

22 Non-case-study questions 3.1 Evaluate how attitudes towards debt are affected by societies and cultural differences. (15 marks) Command word definition: Evaluate Give a verdict as to what extent a statement or findings within a piece of research are true, or to what extent you agree with them. Provide evidence which both agree and contradict an argument. Come to a conclusion which sums up the main points being discussed, weighs up the advantages and disadvantages and benefits and drawbacks of what is being considered, and fully and logically justifies how you have made your choice or decision. Achievement level descriptors: Level Marks 0 0 No relevant evaluation A limited attempt to evaluate attitudes towards debt. There will be a limited understanding of the importance of cultural differences and there will be no, or very few, examples to illustrate this A good attempt to evaluate attitudes towards debt. There will be a reasonably good understanding of cultural differences. Suitable examples are included to illustrate this. There is no clear and explicit conclusion A very good attempt to evaluate attitudes towards debt. There will be a very good understanding of cultural differences. Several suitable examples are included to fully illustrate and explain this. Page 22 of 26

23 There is a clear and explicit conclusion. Evaluation may include but is not limited to: Students may start with a definition of culture. The definition from the materials is: Culture refers not only to people s ethnic and religious backgrounds, but also more generally to the social groups to which they belong. A person s cultural background reflects where and how they were brought up, what ideas were instilled into them as a child, their value systems, the overriding ideas of their peer groups and what is important to them in their lives generally. Cultural factors affect a person s approach to financial services, which products they will buy and from whom. At one extreme, there are groups of people who are not at all concerned about getting into debt and even going bankrupt. At the other extreme are those who see debt as something to be avoided. These people believe that you should not borrow from financial institutions and that, if you do need to, you should borrow only from members of your family. Additionally, Islamic law (Sharia) prohibits the paying and receiving of interest (Riba), and this can exclude a Muslim from borrowing. Islam and some other religions also prohibit gambling in all of its forms. Perhaps those at the extreme ends of the attitude to debt spectrum might learn from each other: those who will borrow up to the last penny might learn some restraint; those who prefer not to borrow at all (other than people with religious reasons) might see that debt limited to what you can afford can have its uses. A person goes through many changes over the course of their lifetime and may witness change in the prevailing culture whether in terms of society or in terms of their own personal experiences. Many of today s keen borrowers are the children of parents who believed in saving and saw borrowing as something to be avoided at all costs. Up until the 1970s borrowing was widely seen as something to be avoided. It was seen as a risky way of buying things that you could not really afford. Hire purchase used to be known as the never-never because people never, never paid the loans off: the only type of loan that was socially acceptable was a mortgage. Conversely, saving and thrift were seen as virtues. If people wanted something, it was better if they saved up until they could afford it. Page 23 of 26 Turn over

24 During the 1970 and 1980s, however, the easy availability of credit cards, store cards, bank loans and other forms of credit helped to make borrowing socially acceptable, and some credit cards even became status symbols. In the wake of the financial crisis, attitudes to borrowing seem to be changing once again, the credit crunch and the recession having caused many people to rethink their position on debt. Many of those in debt took advantage of lower interest charges to try to repay as much of their loans as possible. 3.2 Describe the benefits and drawbacks for banks and building societies of the firsttime homebuyer. (5 marks) Command word definition: Describe Provide a detailed explanation of the main features of something and how and why something happens Achievement level descriptors: Level Marks 0 0 No relevant description A limited attempt to describe. The answer is rather superficial with only a limited attempt to explicitly compare the benefits and drawbacks. There is very limited or no explicit reference to first-time buyers A good attempt to describe. There is a genuine attempt to explicitly compare the benefits and drawbacks. There is a good balance to the answer in terms of both. Explicit reference to first- Page 24 of 26

25 time buyers is required. Description could include but is not limited to: First-time homebuyers provide the banks and building societies with: opportunities for the sale of mortgages that attract interest and fee income; opportunities for the immediate sale of associated products and services; longer term opportunities for the whole range of financial services products as the first-time buyers proceed through the full life cycle; particular potential for cross sales as the first-time buyer will not previously have purchased such products and services and may not have preferred providers; a natural source of new mortgage customers who will in future years be the potential investors of the equity realised in their properties over their lifetime. But: the first-time buyer will tend to take smaller value mortgages than those buyers later in life less potential interest income; the loan to value ratio may be higher and thus potentially pose a higher degree of risk to the mortgage provider; the first-time buyer may have a lower (or no) deposit to offer and therefore there is a greater risk for the mortgage provider in terms of loan to value ratio and repayment if the mortgagor defaults; the mortgage provider may lend at a higher income multiplier thus increasing the risk of default and potential loss for the provider. For all this, the first-time buyer market is very active with providers designing a range of mortgage offers to meet the difficult demands that present-day first-time buyers face. Page 25 of 26 Turn over

26 3.3 Identify five (and only five) responsibilities of the Competition and Markets Authority (CMA). (5 marks) Command word definition: Identify To create a list of a specified number of key points. To specify in clear terms the key aspects relating to a topic without being descriptive. Short bullet points may be used. Note: if a question asks a student to list say 5 features of something, only the first 5 points will be marked irrespective of the number of points the student lists. Allocate 1 mark for each point made from the list below. If two points are made in one sentence, allocate 2 marks. The CMA is responsible for: investigating mergers that could restrict competition; conducting market studies and investigations where there may be competition and consumer problems; investigating where there may be breaches of UK or EU [competition laws]; bringing criminal proceedings against individuals who commit [an offence]; enforcing consumer protection legislation to tackle practices and market conditions that make it difficult for consumers to exercise choice; co-operating with sector regulators and encouraging them to use their competition powers; considering regulatory references and appeals. Page 26 of 26