Glossary

Table of Contents

Accident, unemployment or sickness cover

In a case when a person can’t work for a limited period because of illness or accidental injury, or when the person is made redundant, he/she receives a monthly amount of cash.

Additional Voluntary Contributions (AVC)

Being a member of an Occupational Pension Scheme, person is supposed to pay the contributions. When person pays over and above the normal level it means he/she makes an AVC, in order to acquire additional benefits when retired.

Acceptance letter

Life assurance offer which determines certain terms and conditions.

Accidental Death Benefit

Is included in certain life assurance programs and provides additional payment in case of death of the assured in an accident.

Accidental Death and Dismemberment

Accidental Death and Dismemberment (ADD) is death or loss of limbs of the assured in an accident.

Accrual rate

The rate at which the pension benefits increase at the end of each year within an Occupational Pension Scheme. Usually set as a percentage of the last annual salary.

Act of God

An accident or event, which may happen because of some unforeseeable natural causes, for example, storm, etc.

Additional Borrowing

If you borrow money, but afterwards see that the sum was insufficient, you can ask for additional borrowing.

Annual Percentage Rate

The rate in which all the interests, costs, and other fees are included. It allows you to compare and find the best credit offer.

Annuity

A specified sum of money which person receive on a regular basis for the rest of the life. It is made on a base of the pension fund or a lump sum that was accumulated over the period of working life.

APR

The rate in which all the interests, costs, and other fees are included. It allows you to compare and find the best credit offer.

Arrangement fees

Specified sum of money which is charged by the lender for arranging a credit.

Arrears

The borrower can get into arrears when he/she fails to make mortgage payments on a fixed period or when the monthly mortgage payments are insufficient.

Base rate

Is a rate which the Bank of England fixes and which influence the saving and borrowings rates in the UK.

Basic State Pension

Is a fixed standard pension which is paid to the retired people according to the National Insurance contribution conditions. It is not connected to earnings.

Benefits

The money which should be paid to a beneficiary, claimant, or assignee according to the terms and conditions of the insurance policy.

Bridging Loan

Bridging Loan is normally needed when the person want to purchase a new house but has not yet sold the previous one. In this case, person takes another loan, bridging loan, which will help to bridge the gap between two transactions.

Broker

An agent who helps two parties to get involved into transaction and sign the contract to which he is not a principal.

Building Society

A society in which owners are the members (not shareholders). They pay interests on deposits, give secured loans in such a way giving a possibility to its members to buy their own property.

Buildings insurance

An insurance program according to which the cost of rebuilding and repairing works of the property are covered.

Buildings and contents insurance

An insurance policy under which several covers are combined: the rebuilding or repairing of the property costs and costs for damage/loss of the property contents.

Buy-to-let

When you buy a new property with an aim not to leave there, but to let it.

Capital

Is the certain sum of money needed to make an investment, or is a specified sum of money that you wish to borrow, interests are not included.

Capital and Interest Mortgage

Usually called as a repayment mortgage.

Capped-rate mortgage

The interest rate on a capped-rate mortgage cannot rise above fixed level or cap in a pre-set period, even if the base rate of the Bank of England has increased or become lower.

CCA

According to the CCA (Consumer Credit Act) – UK legislation, banks and other lenders should follow certain set of rules when they lend money to UK citizens.

CCJ

Person is awarded the County-Court Judgement ( in England and Wales) if he/she was summoned to court as for the debt reasons and didn’t turn up or simply lose the case.

Certificated share

When received, a certificated share gives the person right to be present and vote at annual general meetings.

CML

Most of the biggest banks and building societies form the special trade organization which is called Council of Mortgage Lenders.

Commission

As a rule, in order to place a business, financial institutions should pay intermediary a certain amount of money, in other words commission.

Consolidation Loan

Consolidation loan consolidates all your debts in order you to repay all of them.

Contents insurance

With the help of contents insurance, the homeowner can insure all the contents of the home, sometimes even the possessions outside the house can be included in this type of insurance.

Contract

An agreement which two party sing in order to fulfil their obligations.

Consumer Credit Act

Is a certain set of rules of UK legislation according to which banks and other lenders lend money to UK citizens.

Cooling Off Period

Sometimes after a signing an insurance policy or personal loan agreement, the period for person to change his/hers mind is given. During this period person can decide to terminate an agreement without any penalties to be incurred.

County Court Judgement

Usually referred to as a CCJ (common in England and Wales). Person is awarded the County-Court Judgement ( in England and Wales) if he/she was summoned to court as for the debt reasons and didn’t turn up or simply lose the case.

Cover

Is like a protection which insurance policy provides.

Cover Note

Is a confirmation of that an insurance policy is in force.

Credit

Gives a possibility to acquire the goods and services before you pay for them.

Credit search

Before receiving credit, borrower’s credit history is checked by the lenders and a specialist company. They need to find out whether the borrower has ever received CCJ or has failed to repay the debt.

Credit rating

Is the rating of every borrower, which indicates the person’s creditworthy.

Critical illness cover

If the person is diagnosed one of the critical illnesses which is covered by the plan, then the certain sum of money is issued to such a person.

Death Benefit

A payment which insurance company pay after the death of an insured person.

Deposit Account

An account in a bank or building society with the help of which the interests with a variable rate are covered. The rate on interests may become higher if you choose an account without instant access to your money.

Depreciation

Over a period of time, the property (house) or other asset (car) is loosing in value, because of day to day use and natural wear, or obsolescence.

Disability

When person can’t perform duties or job or other life activities due to physical or mental condition.

Disclosure

When applying for an insurance policy, person is obliged to tell the insurer clear and truthful information which can affect the policy which is applied for.

Discounted-rate mortgage

For a certain period of time, lender can give a borrower a discount from the mortgage standard variable rate.

Endowment mortgage

An arrangement whereby a person takes out a mortgage and pays only the interest to the lender. The loan is repaid when it matures.

Endowment policy

A long-term investment plan, including a life insurance which foresees a payout to a successor in a case of a death of the insured person. It is used at the end of the mortgage repayment term. The final payout is not always guaranteed.

Equity Release

A type of remortgage where you use the value of your already bought home as security to borrow money.

Financial Ombudsman Service

Independent institution which considers complaints connected with investments, banking and insurance.

Financial Services Authority (FSA)

Is the regulatory authority for financial services in the UK. It sets up the rules for financial companies operation and protects public interests.

Fixed-rate mortgage

Is the mortgage with the set interest rate for a certain period of time.

Flexible loan

A loan which you can increase or decrease according to your need in money. The highest borrowed amount is usually agreed.

Flexible mortgage

A mortgage which you can increase or decrease according to the conditions. It is sometimes even possible to stop making payments for a certain period of time.

Fixed Rate

Is an interest rate which is strictly determined and set for a mortgage period.

FSA (Financial Services Authority)

Is the regulatory authority for financial services in the UK. It sets up the rules for financial companies operation and protects public interests.

General Insurance Standards Council

Guarantees that sales standards are observed and provides advice on general insurance.

Guaranteed growth bonds

Investments with a fixed term between 3 and 5 years. You make an investment and get a guarantee that at the end of the fixed period you will get additional minimum or at least won’t loose an original invested amount.

Health Insurance

Is a financial compensation provided in case of sickness or injury.

Hedging

Is used when you want to protect the investment against risks.

High-lending fee (mortgage indemnity guarantee)

If the loans are higher than 90% of the property value, then lenders may charge for them high-lending fee.

Home insurance

Insurance which is issued in order to cover your home losses. You can use 2 types of home insurance: firstly, you can insure your property in order to cover your building value (‘bricks and mortar’) and you can insure the content of your house (furniture, gadgets, etc.)

HP

Hire purchase – means that you hire the thing which you are going to buy. You hire the thing in question for a certain period of time and pay monthly instalments plus interests.

Illustration

With a help of illustration it is possible to calculate the return from the investment. Calculation includes extra charges or fees that you may incur.

In Arrears

The borrowed sum money which was not returned in time.

Income protection policy

If you can’t make further payments, due to the income shortening or redundancy, insurance policy will cover your expenses.

Indemnity policy

Insurance which covers the second-hand value of your home contents.

IFA

Independent Financial Adviser – an independent expert who can give an advice or offer and sell the insurance companies policies. Such services can be offered to a person by banks, building societies and other financial services providers.

Individual Savings Account

Is an account which is used to save cash in order to invest it or not and which is free from income and capital gains tax.

Insurance Premium Tax

Tax imposed on most insurance policy premiums (it does not apply to life insurance policies).

Intermediary

An agent or organisation which provides advice and certain services for policies arranging.

Interest

A certain equivalent of money which is needed to be paid every month for the borrowing.

Interest-free Credit

Is a credit which you pay every month (from 6 to 12 months) in equal parts until you will pay off the total amount, no interests are charged during this period. Usually, a lot of stores propose interest-free credit.

Interest-only mortgage

During the specified for mortgage term, you pay only interest, but the money needed to pay the mortgage itself are put into the investment scheme and when the mortgage term comes to an end they are given to cover the mortgage.

ISA

Individual saving account – is an account which is used to save cash in order to invest it or not and which is free from income and capital gains tax.

Key Person Insurance

A type of insurance which covers the losses of income of a business in case of disability or death of an employee who occupies a key position in the company.

Lease

When person owes some property or asset (car, building, machinery item, etc.), he/she can give the right for using this property or asset to other person in return for rent being paid.

Leasehold

Buying a leasehold property, you buy property itself but not the land the property situated on.

Lender

An agent, institution (such as bank or building society) which lends money with a certain type of interest rate.

Liability

A sum of money that you owe to the lender. In other words – debt.

Life Insurance

In case of a death of the insured person, dependants will receive a lump sum.

LTV

Loan to Value – the principal amount of the mortgage expressed as a percentage rate of the property’s value or the amount which is paid for the property.

Lump Sum

Specified amount of money which is paid only once, contrary to receiving or paying money in instalments.

Maxi ISA

An individual saving account in which you can invest annually up to £7,000 without any tax. It is allowed to make investments in stocks and shares in cash saving up to £3,000 and in life insurance investments up to £1,000.

Mini ISA

An individual saving account in which you can invest in cash up to £3,000, in stocks and shares and in life insurance investments up to £1,000 annually without any tax. Each tax year, you are allowed to have one of each type of mini ISA.

Mortgage

A lender gives you a mortgage for property acquisition. There are several types of mortgage, almost all of them should be secured, and they are issued for different terms. For example, ‘buy to let mortgage’ allows the borrower to buy a property in order to let it.

Mortgage indemnity insurance

If the borrowers want to borrow more money than a value of their property, a lender can charge an additional payment in order to take out insurance.

Mortgage payment protection

If the borrower is made redundant or can’t work for a certain period, the money will be still paid according to the mortgage payment protection policy.

Mortgage valuation

A valuation of the property that borrower wants to buy by mortgage lender.

National Savings

Saving accounts which are proposed by the Government and can be run without any taxes.

Negative Equity

When your mortgage is higher than the cost of your house, due to the decrease of property value.

Non-status Mortgage

Lenders, who has no proof of previous mortgage history or proof of income offer non-status mortgages with the maximum loan value of 70%.

Occupational Pension Scheme

Is a pension scheme set for employees by an employer.

Offset mortgage

Also called as all in one mortgage, which allow the borrower to combine all the borrowings and savings under one account within the same lender. The balance of the mortgage and all other borrowings are offset against any money you have in savings or in account.

Ombudsman

An independent official to whom you can apply with a complaint free of charge.

Overdraft

When the debt to your bank is much overlapping the sum of money which you have on your current account.

Partial Disability

Less than total disability which can still prevent the person from doing particular job (the notion which is common for contracts)

PAYE

Pay-As-You-Earn – before you get your salary, your employer should pay on your behalf an income tax from your salary directly to the Inland Revenue.

Payment Holiday

Is offered by some lenders who allow you to miss one or several monthly payments on your mortgage.

Payment protection

Is aimed to cover the monthly expenses on a loan or credit card in case when a borrower is made redundant or can’t perform the work due to illness or injury.

Pension Scheme

Is a monthly saving needed for a retirement.

Pension Transfer

When pension savings are transferred from one management company to another, or from one employer to another.

Pensioner

A retired person who has the right to receive pension payment from a pension scheme.

Permanent Total Disability

A totally disable person is a person who will not likely recover in the future.

Permanent health insurance

If person can’t perform the work due to sickness or disability, he/she can receive an income due to permanent health insurance.

Personal Loan

A secured loan with a fixed rate which is taken for a certain period by an individual and according to which monthly repayments are made.

Redemption penalty

If the borrower decides to change the lender or repay the mortgage earlier or, sometimes, later than it was agreed according to a pre-set period, he/she is charged an additional fee which is called redemption penalty.

Refinancing

When the old loans are repaid in order to obtain new loans with more preferable interest rates.

Remortgage

When the new mortgage is taken from another lender in order to repay the previous mortgage. In this case you can bargain a better rate and save the money.

Repayment mortgage

When you repay part of the debt and the interests on outstanding loan every month.

Repossession

When the lender has the right to own a property, because the borrower failed to repay the mortgage in a pre-set period.

Secured loan

A loan with a security (as a security you can provide your house). If the borrower fails to fulfil his/hers obligations, the lender has the right to sell the security in order to get the money back.

Standard variable rate

The mortgage interest rate which is constantly changing (rise or fall) compared to the base rate of the Bank of England.

Title Deed

Is a document which gives information about property owner and other details concerning property and the land it stands on.

Total Borrowing

The actually borrowed on your account sum of money.

Total Disability

When person can no more perform normal daily tasks and do other job.

Tracker mortgage

When you get quick benefits due to the tracks movements in the Bank of England base rate (for example when interest rate falls).

Unit Linked Endowment

A savings plan with an element of life cover and fixed term which allows you to save your money in shares in an underlying fund. The return on these investments depends on their performance.

Unsecured loan

A loan, repayment of which should not be confirmed with any secure or asset such as your home, etc.

Valuation

Usually made by a professional surveyor in order to find out the real value of the property and if there are reasons to borrow money for such a secured asset.

This Financial Glossary gives general information only. If you want to get detailed information on any of its terms, please turn to a professional in order receive qualified advice.