Understanding financial terms is crucial for making informed decisions. Browse our comprehensive glossary below.
Interest calculated on both the initial principal and the accumulated interest from previous periods. This is often described as "interest earning interest."
Example: If you invest £1,000 at 5% annual compound interest, after one year you'll have £1,050. In the second year, you'll earn interest on £1,050, not just the original £1,000.
The yearly interest rate that represents the total cost of borrowing, including fees and compound interest effects.
Example: A credit card with an 18% APR means you'll pay approximately 1.5% interest per month on any unpaid balance.
The practice of spreading investments across different assets to reduce risk.
Example: Instead of investing all money in tech stocks, an investor might split investments between stocks, bonds, real estate, and cash.
A graph showing the relationship between interest rates (yields) and different maturities of debt (like government bonds).
Example: An "inverted yield curve" (short-term rates higher than long-term rates) can sometimes indicate a coming recession.
A tax paid when purchasing property or land in England and Northern Ireland above a certain price.
Example: On a £300,000 property purchase, you might need to pay SDLT on the portion above the tax-free threshold.
The ratio between the mortgage amount and the property value, expressed as a percentage.
Example: If you borrow £180,000 to buy a £200,000 house, your LTV is 90%.
Freehold means you own the building and the land it stands on outright; leasehold means you have a lease from the freeholder to use the property for a certain number of years.
Example: Many flats (apartments) are sold as leasehold, whereas most houses in the UK are freehold.