glossary

Administration Fee
This is a fee charged by some lenders which is not refundable if the mortgage application does not proceed. The Administration fee will often form part of the valuation fee but will be retained by the lender even if the valuation has not been carried out.

Adverse Credit
This is a general term which encompasses arrears and county court judgements. It can also include major credit problems which have resulted in bankruptcy. For further information look at arrears, county court judgement and bankruptcy.

Advisory Funds
Funds placed with a bank or financial institution which may be invested at the bank or institution's discretion on the client's behalf.

AER - Annual Equivalent Rate
This illustrates what the interest rate would be if the interest was paid into the account and compounded each year. As every advert for savings products will contain an AER the consumer will be able to compare more easily the expected return from differing products.

Amortisation
The settlement of a debt through the periodic repayment of principal and interest payments.

Annual Percentage Rate
This is meant to show the true cost of borrowing and adjusts the notional interest rate to take account of all the initial fees and ongoing costs to reflect the real cost of borrowing throughout the entire mortgage term.

Annuity Mortgage
(See Repayment Mortgage)

APR - Annual Percentage Rate
Introduced under the Consumer Credit Act 1974 as a means of comparing like with like ie. One loan with another or one credit card to another. It should be quoted whenever money is borrowed. The APR calculates the total interest to be paid over the whole term and includes any charges to be paid as well as the headline interest rate.

Arrangement Fee
This is a fee charged by some lenders in order to access particular mortgage deals. Arrangement fees particularly apply if you are looking for a fixed rate or discounted rate mortgage and these may either be payable up front, added to the loan on completion, or deducted from the loan on completion (check with the chosen lender which one applies).

Arrears
Contracted mortgage payment not made by the due date. Applicants who have arrears on a current mortgage may experience problems if attempting to arrange a new mortgage through the mainstream lenders. A number of lenders do, however, specialise in this area of the market and their details can be found in the arrears section of the moneynet site.

A.S.U.
Accident,sickness and unemployment insurance (sometimes referred to as A.S.R. - accident,sickness and redundancy insurance ). This is an insurance policy which is taken out by the borrower and protects against the borrower being unable to work for these reasons. The policy will usually pay a percentage of the normal monthly mortgage repayment (plus insurance) if the borrower is unable to work due to accident/sickness or unemployment/redundancy. These payments will normally only be made for a limited period of time - typically 6/12 months or until the borrower returns to work. The terms of these policies and the cost vary considerably from company to company.

ATM - Automated Teller Machines
Commonly referred to as cash dispensers or hole in the wall machines. Enables the user to access their account for withdrawals (typically up to £250), get a balance, order statements or cheque books and sometimes pay bills or pay money in, 24 hours a day. There may be a charge if you use an ATM not supported by your own bank or user group.

Bank of England
UK's central bank responsible for the regulation of the banking industry, issuing of money and more recently the control of inflation, with the formation of the Monetary Policy Committee under the new Labour government.

Bankruptcy
Anyone can go bankrupt, including individual members of a partnership. There are different procedures for dealing with companies and for partnerships themselves. When a bankruptcy order has been made you must:

not make payments direct to your creditors. You may also have to go to court and explain why you are in debt. If you do not co-operate, you could be arrested.

Base Rate
The minimum rate at which banks are prepared to lend money, altered by the central bank's dealing rates with the discount houses. It forms the benchmark for all other interest rates.

Basic Rate of Tax
The basic rate of income tax is set in the annual budget.

Basis Point
Unit of measure (usually one hundredth of a percentage point) used to express movements in interest rates, foreign rates or bond yields.

Beneficiary
The recipient of the assets subject to a Will or Trust. Essentially the nominated receiver of the benefit from the proceeds of a Will/Trust usually specified in the documentation.

Bonus
Additional payment of interest if defined conditions are met, typically if an investment is held for a certain term or if withdrawals are kept under a certain limit.

BSA
Building Societies Association.The Trade Association representing interests of member societies, the number of which are reducing as societies convert to banks.

BSC - Building Societies Commission
Watchdog or regulatory organisation, answerable to the Treasury, that ensures Building Societies comply with the Building Society Act.

Buy to Let
A term used to describe the purchase of a residential property for the sole purpose of letting the property to a tenant. While some lenders will not provide mortgage finance for this purpose a number do specialise in this niche area of the market. The details of these lenders and the terms on which they will grant a mortgage can be found in the Buy to Let section of the moneynet site.

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