Question

Question 1 Geoff and Linda live in Glasgow. Both are teachers, with Geoff in full time and Linda in part-time paid employment. When they bought a flat together in June 2018 the i mortgage broker talked them through repayment and interest-only mortgages. They decided to use their savings as a deposit and chose a repayment mortgage, which by June 2020 was standing at £100,000. The market value of their flat had increased by 10% over this time period on the original purchasing price of £110,000. Together, in June 2020 the couple earn a net monthly income of £4000 and their expenditure has averaged £4200 a month over the last two years. In June 2020 their car loan is down from £4,000 to £2,500, their current account balance has dropped to zero and they have an overdraft on their current account of £1500. Meanwhile their savings account holds just £300. They also owe £3000 on a credit card. The rest of their balance sheet has not changed since June 2018. They are reviewing their finances as they are considering improving their home by installing a new kitchen. Table 1 shows their balance sheet and financial ratios in June 2018 Table 1 Geoff and Linda's household balance sheet - June 2018 June 2018 Assets 113,120 Liquid assets 3,120 Cash 120