Sandra lives in a one-bedroom flat in Glasgow. She works as a full-time call centre operator, taking 999 calls. When she bought the flat in February 2020, the mortgage broker talked her through repayment and interest-only mortgages. She decided to use her savings as a deposit and chose a repayment mortgage which, by February 2022, had an outstanding balance of 125,000. The original purchase price in 2020 was 159,000 and the market value of her flat has increased by 3% over this time period.

In February 2022, Sandra earns a net monthly income of 1,610 and her expenditure has averaged 1,630 a month over the last two years. In February 2022, a loan to conduct an initial refurbishment (an updated heating system) is down from 3,000 to 1,000, but her current account balance has dropped to zero. She has no cash and she has an overdraft on her current account of 1,500. Meanwhile, her savings account holds just 120 and she also owes 2,500 on a credit card.

She is reviewing her finances as she would like to buy a second-hand car.

Table 1 shows her balance sheet and financial ratios in February 2020.

Table 1Sandra's household balance sheet - February 2020
	February 2020 ()
Assets (Total)	161,250
Liquid assets	2,250
Cash	250
Current account	1,500
Instant access savings account(s)	500
Other liquid assets	0
Other assets	159,000
Home	159,000
Liabilities (Total)	137,500
Short-term liabilities	1,500
Overdraft	0
Credit card	1,500
Other short-term liabilities	0
Other liabilities	136,000
Personal loans	3,000
Mortgage	133,000
Ratios
Net worth / wealth	23,750
Current asset ratio	1.5
Leverage ratio	85.27

1.1Using the information provided above, complete Sandra's balance sheet for February 2022.(4marks)

1.2Explain the factors Sandra might have considered in choosing a repayment mortgage over an interest-only mortgage in 2020.(3marks)

1.3Using the financial ratios and other relevant information, compare Sandra's financial situation in February 2020 and February 2022.(4marks)

1.4Briefly explain two other possible actions Sandra could take to improve her financial situation.(4marks)