We’ve compiled a list of the most common banking terms to help you better understand our products. If something appears in bold then it has its own definition elsewhere in this guide.
Affordability
Banks or lenders perform checks to make sure you can meet your loan or mortgage repayments.
Annual Equivalent Rate (AER)
The banking industry uses AER as the standard way of telling you how much interest you’d earn on a savings account. It tells you the rate you’d get if you saved a given amount for a year. It also helps you compare different savings products, including from different banks.
Annual Percentage Rate (APR)
The APR is how the banking industry shows you how much loans and credit cards would cost you, allowing you to compare different products from different lenders. It tells you how much you’ll pay each year if you borrow a given amount of money.
Arranged overdraft
See Overdraft.
Arrears
Being in arrears means you're behind with payments on your mortgage, or other loans.
Assets
Any valuable items you own, including cash, property and investments.
ATM (Automated Teller Machine)
A cash machine.
Authorised Push Payment (APP) scams
These happen when someone else dishonestly tricks you into sending them money and;
- they’re not who they say they are; or
- the money won’t be used for the purpose you intended.
The name comes from the fact that you’ve ‘pushed’ the money to them under false pretences.
Available balance
The amount in your account that you can withdraw. It may not be the same as your account balance if, for example, there are pending payments still to be made.
Bacs (Bankers Automated Clearing Service)
Bacs payments are used for automatic regular GBP payments. Unlike Faster Payments and CHAPS, Bacs payments are mostly used for regular, non-urgent, low-value payments that do not require a same-day settlement. They usually take the form of Direct Credits or Direct Debits.
Balance due
This is the amount of payment required by a specific date, usually to settle an invoice or a credit card bill, for example.
Balance transfer
When you move an existing debt from one credit card to another.
Bank of England base rate
The rate at which the Bank of England charges other banks to borrow money. This influences interest rates all over the UK. It’s determined at regular meetings of the Bank’s Monetary Policy Committee.
BankID
A secure digital identification solution used by banks and other organisations. It lets you prove your identity and sign documents online.
Beneficiary
A person or entity chosen to receive someone’s money or benefits after they die, usually nominated in their will, insurance policy or other contracts.
It can also mean someone who receives money (also known as a payee).
Benefit period
A period of time after you take out a new mortgage where the interest you pay is agreed for a certain period (for example, five year fixed, two year tracker, which is a variable interest rate). At the end of your benefit period, you can usually choose another benefit period or allow your mortgage to revert to Standard Variable Rate.
Buy-to-let mortgage
A mortgage designed for someone who intends to buy a property to rent out. This isn’t the same as a consumer buy-to-let mortgage.
Capital and interest (repayment) mortgage
A mortgage in which your regular repayments are made up of interest plus a proportion of what you borrowed to buy the house (capital). When you make your final payment there’s nothing left for you to pay on the mortgage (as long as you’ve kept your payments up to date throughout the term).
Card Security Code (CVV or CVC)
A three-digit number located on the back of a credit or debit card, used to verify transactions when the cardholder isn’t physically present.
Capital
A sum of money.
Usually used to mean:
- the amount you borrow to buy a property; or
- money put into a savings account or invested.
Cashpool
See Offset mortgage.
CHAPS (Clearing House Automated Payment System)
A UK-based system for transferring cleared sterling funds on the same day. A fee is charged for CHAPS payments. They’re often used for high value and high priority payments, like a house purchase.
Charge card
A type of payment card that allows you to borrow money, without interest, but that requires you to repay the balance in full at the end of each month.
Collateral
See Security.
Compound interest
If the interest you earn on your savings, pension or investments is left in the account rather than paid out, it then starts to earn interest on itself in addition to the initial capital. In time it has the potential to grow exponentially. Here’s a simple example:
If you saved £1,000 for 10 years at a fixed rate of 4%, you might think your account balance at the end would be £1,400.
But it would actually be £1,480.24.
Consumer buy-to-let mortgage
A mortgage intended for an ‘accidental landlord’. This is often appropriate if someone inherits a property with an outstanding mortgage which they can’t afford to pay themselves. This type of mortgage allows them to rent out the property to help pay the mortgage. It’s only intended for someone who has a single rental property and doesn’t intend to live there.
Credit
- Anything paid into a current or savings account – ‘the bank agreed to credit her account with £25’.
- An arrangement where someone buys something now but will pay for it later – for example ‘He bought his new TV on credit’.
Credit card
A payment card that allows you to pay for goods or services on credit. You either pay a minimum amount, agreed with your lender and often with added interest, or clear the balance in full by a given date in the future.
Credit limit
A credit limit is the maximum amount you’re able to borrow with your credit card.
Credit rating
A score used by lenders to decide whether to lend money to someone, and how much.
Current account
A type of bank account from which you can deposit and withdraw money without notice. It's often used for day-to-day banking.
Current Account Switch Service (CASS)
A service that allows you to easily switch to another bank. You can choose the date you want the switch to happen, which can be as soon as seven working days.
Debit card
A card that lets you spend money directly from your bank account. The money is debited (taken out) straight away when you make a purchase.
Deposit
- The money you contribute towards the cost of buying a property, with the rest needing to be covered by a mortgage. The minimum deposit required varies by lender. Generally, the higher the deposit, the lower the loan to value and mortgage rate.
- Anything you pay into a bank account. Also see Credit.
Deposit protection
See FSCS.
Digital ID
A Handelsbanken app that allows you to log on to online banking and authorise payments.
Direct Debit
A payment method where you authorise a company to take money from your account. This method is used only for payments to companies, not individuals, and the company sets up the Direct Debit with your permission. This is how, for example, most people pay their phone bill. Direct Debit payments are protected by the Direct Debit Guarantee scheme.
Direct Debit Guarantee
A scheme protecting Direct Debit customers. If whoever set the Direct Debit up (the originator) or the bank makes an error, the customer is guaranteed full and immediate refund.
Early repayment charge (ERC)
A fee some mortgages carry, often during their benefit period, if you repay all or a significant portion (outside of your allowable limit) of your mortgage early, or switch deals. This is not applicable if the early repayment charge period has expired or doesn't exist.
End of benefit
When your mortgage’s benefit period ends and it switches to a Standard Variable Rate.
Equity
The portion of a property that you own.
If your home is worth £500,000 and you still need to repay £100,000 of your mortgage, you have £400,000 in equity, or 80%.
Equity release
A mortgage type designed for later-life homeowners looking to release cash, or equity, from their property. Independent financial advice is needed for this type of mortgage.
Faster Payments
A method of domestic payment that allows you to make payments (up to £100,000 for individual customers, £250,000 for corporate customers) at no cost. The beneficiary/payee usually receives these payments within a few hours.
Fixed rate mortgage
A type of mortgage where the interest rate is set for a specific period. This means that you'll pay the same amount each month during your fixed rate period. At the end of this period, your rate will revert to the lender’s Standard Variable Rate. See variable rate mortgage.
Foreign Exchange (FX)
The exchange of one currency for another, or the conversion of one currency into another currency. In banking, it often refers to trading in the foreign exchange market.
FSCS
Anything up to £85,000 that you deposit with a UK bank is protected by the UK's Financial Services Compensation Scheme (FSCS) Opens in a new window. The limit is £170,000 for joint accounts. Some banks share a banking licence, so you may want to check that money held in two different banks is fully covered or whether there is a single £85,000 limit for both banks. The scheme also protects certain temporary high balances up to £1 million (for example, the money raised by a house sale) for six months from when the amount was first deposited.
Gross interest
Credit interest that hasn't been subjected to income tax deductions. See net interest.
Guarantor
An individual who commits to paying a borrower's debt if the borrower fails to do so.
Handelsbanken Base Rate
The base rate set by Handelsbanken, used as a reference rate for setting the interest rates on our loans.
Higher lending charge
A fee imposed by a mortgage lender when the borrowed amount exceeds a certain percentage of the property value.
IBAN (International Bank Account Number)
Rather than using the regular account number and sort code, the IBAN is usually required for international money transfers.
Instant access account
A type of savings account where you can deposit and withdraw money as much as you like, without having to give the bank notice, unlike a notice account.
Interest
Money either charged or paid by financial institutions. When you borrow money, you’re usually charged an amount that you must repay (debit interest). If you save or invest money, the bank often pays you money on top of it (credit interest).
Interest-only mortgage
With an interest-only mortgage (as the name suggests), your monthly payments only cover the interest you’re charged by the lender. Your payments don’t pay off any of the capital you originally borrowed. That means at the end of the loan term, you’ll need a lump sum to pay off the mortgage. Because of this, your lender will ask for evidence of a suitable repayment strategy when you first apply for the mortgage.
Interest rate
The percentage rate at which interest is either charged or paid, depending on the context.
ISA (Individual Savings Account)
Savings and investment products where you won’t be charged tax on the interest you earn, or on your investment's increase in value.
An ISA is designed as a tax-efficient way to save or invest. They come in several forms but the two most common are cash, and stocks and shares. A cash ISA works like a regular savings account, while a stocks and shares ISA allows you to invest in equities.
In both cases, you can ‘subscribe’ (pay in) a total of £20,000 (as at 2024/25) to all your ISAs in a single financial year.
Loan to Value (LTV)
The ratio of how much your property is worth, compared to how much you need to borrow.
So if the house value is £500,000 and you need to borrow £500,000, your LTV is 100%.
If you need to borrow £250,000, your LTV is 50%.
A lower LTV generally results in a lender offering a lower interest rate.
Log-on card
A card that is required to access online banking for the first time. Certain functions, such as creating a new standing order, will require a log-on card and card reader.
Maturity date
On loans and mortgages, this is the date the final payment is due.
For savings accounts like bonds and deposits, it's the date you can access your money.
Mobile banking
A feature that allows customers to manage their money on the go securely. Customers can find instructions on the Handelsbanken website on how to register for the app and control which devices have access to mobile banking.
Mortgage
A loan taken out to buy property or land. The property or land is used as security for the loan.
Mortgage term
The duration over which you take out a mortgage – for example, 25 years.
Net interest rate
This refers to the interest rate you get after income tax and other deductions.
Notice accounts
These are savings accounts that offer higher interest rates in return for you giving notice to the bank to withdraw your money. If you don’t give the specified notice (e.g. 90 days) you may lose interest payments.
Offset mortgage
A type of mortgage that is linked to a Handelsbanken savings and/or current account. The balances in these accounts offset the amount of interest charged on your mortgage, potentially reducing the interest you pay.
At Handelsbanken we have also historically referred to this as a cashpool.
Overdraft
Allows you to keep using your current account when you don’t have enough money, giving you increased flexibility and a safety net for when something unexpected arises. It is a short-term way to borrow money. Like most forms of credit, overdrafts cost money so it’s a good idea not to rely on them, and top your account up as soon as you can. An overdraft is often referred to as an 'arranged overdraft' or an 'unarranged overdraft':
- An arranged overdraft is arranged with your bank before you use it, hence the name. It means payments can leave your current account even when if they’ll take your account balance below zero. It has a set limit, for example if your overdraft is £500 then your account balance can go to -£500.
- An unarranged overdraft is when you go beyond your arranged overdraft limit, or if you don’t have one, you continue to spend from your current account after your balance has gone below zero. This may result in some payments not being made. Unarranged overdrafts are generally more expensive than arranged, and they can have a negative effect on your credit rating if they’re used regularly.
Overpayments
Any payments made beyond your standard monthly mortgage payment.
Payee
The person or business to whom the payer sends money.
Payer
A person or business that send money to a payee or beneficiary.
Payment cut-off times
The times by which you need to make a payment or transfer for it to be processed that day.
Payment holiday
A payment holiday is a period during which you don’t have to make mortgage payments. However, interest continues to build up. This is often used to support customers in financial difficulties.
Porting a mortgage
A feature that allows you to transfer your existing mortgage deal from one property to another when you move.
Principal
The original sum of a loan on which the interest is calculated. See also capital.
Reference rate
An interest rate that’s used as the basis of a financial contract. For example, a mortgage may use the Bank of England base rate as its reference rate.
Remortgage
The process of switching your existing mortgage to a different lender, but staying in your current home.
Retail Price Index (RPI)
The RPI is a measure of inflation. It looks at the price changes for typical, frequently purchased items. The change in the price of these is used to work out the inflation rate.
Secure Mailbox
A feature that allows you to send messages to their local branch securely.
Secured loan
You can get additional loans secured on your home for things like home improvements. This may be called a ‘second mortgage’ or a ‘further advance’. If repayments aren't met, the lender may seek to repossess your home to settle the outstanding debt.
Security
Assets pledged to a lender to secure a loan, giving the lender the right to sell these assets if the borrower can’t repay the loan.
Self-build mortgage
A type of mortgage specifically for people building their own home. It normally provides the loan in instalments in sync with your construction phases and transitions to a residential mortgage when the property is completed.
Single Euro Payments Area (SEPA)
A service that allows customers to make and receive euro payments across Europe, without incurring the charges normally associated with SWIFT payments.
Sort code
A six-digit identifier code, usually unique to each bank branch. However at Handelsbanken we have two set sort codes:
- Individual and joint accounts: 60 95 34
- Corporate accounts: 40 51 62.
A small number of our individual and joint accounts use the corporate sort code of 40 51 62, which is fine to use for cheque/counter services.
You can find yours in your account details or statement.
Standard Variable Rate (SVR)
The SVR is determined by your mortgage provider. It’s the rate to which your mortgage will revert at the end of your initial benefit period. As it's variable, this rate can change and may be higher or lower than your initial rate.
Standing order
A regular automatic transfer of a fixed amount to another person, another of your own eligible accounts, or a company. These payments are made on agreed dates. Unlike a Direct Debit, you set them up yourself.
SWIFT (Society for Worldwide Interbank Financial Telecommunications)
An international payment system used for credit transfers between countries.
Term
The period over which you repay your mortgage. If you have a 25-year term, that means that you’re due to make your final mortgage payment 25 years from when you first took it out.
Tracker mortgage
See variable mortgage.
Transfer
A transfer is the process of moving money between your own accounts within the same bank, as opposed to a payment, which is sending money to another person's account, to your own accounts in a different bank.
Unarranged overdraft
See overdraft.
Variable interest rate
An interest rate that goes up and down, usually in line with a reference rate like the Bank of England base rate. When it’s low, it’s good news for borrowers (who’ll pay less) and bad news for savers (who’ll earn less). When it’s high, the opposite applies.
Variable mortgage
A type of mortgage where your interest rate tracks another interest rate, typically the Bank of England base rate for a certain period of time. As this rate rises or falls, so does your mortgage payment.
Wealth management
A professional service that combines financial and investment advice, accounting and tax services, and legal and estate planning. Handelsbanken offers tailored wealth solutions for its customers.