Personal Intermediaries Commercial Search Submit About Contact us News Login/Register Savings Mortgages Help & Support “What does that mean?” Financial jargon, busted. Have you ever read a letter from your bank, financial document, blog or news article and thought, “what does that mean?” Yeah, us too. The financial services industry is guilty of relying on acronyms and jargon to speed up the process of talking all things money. Great if you’re an IFA, dealing with RIO wanting to know the SVR or the LTV and if there are ERCs. Not so great if you’re a customer who just wants to feel confident their money is in safe hands. At Hodge we do our best to make sure the information you receive from us is as simple, and straightforward as possible, but we’re always striving to do more. So, with that in mind, we’ve created this jargon buster to help you differentiate between your DiPs and your SVRs, and everything in between… Download our Jargon Buster Glossary A-C AER AER stands for Annual Equivalent Rate, and it’s a type of interest rate for savings accounts. It’s calculated based on the interest, bonuses, and charges on your savings account across a 12-month period. Variable AER means the amount of interest you’ll earn will change, either going up or down. The same principle applies for mortgages too, but in reverse, as it refers to the interest you’ll pay, rather than earn. APR This stands for Annual Percentage Rate, which takes into account the interest rate and additional charges of a credit offer. Before you sign a credit agreement, lenders have to tell you what the APR will be. It’s always expressed as a percentage of the amount you’ve borrowed and is used for comparing credit cards and unsecured loans. APY The Annual Percentage Yield is earned on a deposit account, and savers can use APY as a factor to help work out which savings options are the best. ARRANGEMENT FEE Sometimes you’ll pay an arrangement fee (sometimes called a product fee) for setting up a mortgage. It can either be paid separately, when you first take the mortgage, or be added to your loan, meaning you’ll pay interest on it for the whole mortgage term. ARREARS If you go into arrears it means you’ve missed a payment at least once on your mortgage repayments. It’s really important to get in touch with the mortgage provider as soon as possible if you think you may go into arrears. ATM You probably know them better as the hole-in-the-wall that withdraws cash if you need it. But the posh word for them is an Automated Teller Machine. There’s a network of fee-free ATMs in convenient locations around the UK. AUTOMATED CREDIT TRANSFER This is a direct payment made to your account from another account. BACS A BACS (Bankers’ Automated Clearing Services) transfer is one where you send money electronically to pay for something. BALANCE TRANSFER If you owe money on a credit card that’s charging you interest, you can transfer the debt onto another card, usually with a better rate, and it’s known as a balance transfer. BASE RATE You’ve probably heard the Bank of England base rate mentioned on the news and, while it doesn’t really impact savers directly, it is the rate that banks and lenders use to calculate how much interest you’ll pay on mortgages and other financial products. BROKER This is an adviser who can help you arrange a mortgage. You may have to pay more for a broker than sorting it directly with the bank or building society. BUY-TO-LET A buy-to-let property is one that’s bought with the sole intention of letting it out to tenants. Most lenders offer a special mortgage for this. CAPITAL The amount of money you borrow to buy a property. CAPITAL GAIN You make a capital gain if you sell a long−term asset (such as a house) for more than it cost you to buy. It’s basically the profit that you make on a purchase. CAPITAL GAINS TAX (or CGT) Capital Gains Tax is a tax charged if you sell, give away, exchange or otherwise dispose of a property and make a profit or ‘gain’. The tax is on the ‘gain’, rather than the amount of money you received. CAPPED RATE If your mortgage has a capped rate, the rate will never go above the ‘cap’, even if the Bank of England rates change. CHILD TRUST FUNDS These are tax free savings accounts for children born between September 1 2002 and January 2 2011. They were designed so children can become savers for their adult life, and have since been replaced by Junior ISAs. You can’t apply for a new one now that the government scheme is closed, but you can keep an existing one. CLEARED FUNDS These are the cash balances in an account that can be immediately withdrawn or used in financial transactions. COMPOUND INTEREST Whereas normal interest is based on a percentage of the original sum of money, compound interest also accounts for the money added on by previous instalments of interest. Compounding can work to your advantage as your savings and investments grow over time, as interest is added to the interest. CONVEYANCING Conveyancing is a term used to describe the legal process you must go through when you buy or sell property. This can be done by a solicitor or licensed conveyancer. CREDIT SCORE A credit score is a tool that lenders use to help determine whether you qualify for a particular credit card, loan, mortgage or service. Your credit score reflects the way you’ve managed your debts and bills in the past, so if you have previously borrowed money and consistently kept up with repayments, you’ll probably have a good score. However, a history of missing or making late payments would have had a negative impact. CURRENT ACCOUNT With banks offering so many different accounts, it’s probably worth explaining that this is the one that works as a one-stop shop for your finances. It’s usually where your main salary goes and where bills are paid via direct debit, and where your cash is withdrawn. D-F G-L M-P O-Z Products Fixed Rate Bonds ISAs Notice Accounts 50+ Mortgage RIO Mortgage Holiday Let Mortgage Banking Terminology Jargon Buster Links Making a Complaint Sustainability Financial Services Compensation Scheme Brexit Statement Modern Slavery Statement Statement of Commitment to the UK Money Markets Code Statement of Commitment to the Financial Abuse Code of Practice Women in Finance Internal Audit Charter Social Hodge Bank is a trading name of Julian Hodge Bank Limited which is registered in England and Wales (No. 743437). It is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 204439. Its registered office is One Central Square, Cardiff, CF10 1FS. Holiday Let, Portfolio Buy to Let loans, Residential Investment lending and Development Finance are unregulated financial products. © Copyright Hodge Bank 2020 Cookies Privacy Careers Accessibility Sitemap Financial Information Online Security Press Office Making a Complaint This site uses cookies Some of these cookies are essential, while others help us to improve your experience by providing insights into how the site is being used. I AcceptReject All Necessary Cookies Necessary cookies enable core functionality. The website cannot function properly without these cookies, and can only be disabled by changing your browser preferences. Performance Cookies These cookies tell us how you and our other customers use our website. 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