Misuse of term 'AER'?

Milarky

As in:



At Stroud and Swindon. The only account paying '5%' is the Escalator Bond Issue 7 - paying 3%, 4% and then 5%. This then becomes '5% AER' during the 3rd year. Of course the bond is basically a 4% account - yet the definition of 'AER' (that is, the Annual Equivalent Rate - but only for periods upto a year) must be met, I assume?

Surely something the FSA's new regulation of banking should address (and, being the FSA they won't, of course)?

RayWolfe

Does say "up to". It stinks, but that's marketing!!

Reaper

I would say misuse. Its a fixed term 3 year policy so surely the AER has to be the average over the 3 years?

opinions4u

Reaper wrote: »

I would say misuse. Its a fixed term 3 year policy so surely the AER has to be the average over the 3 years?

That's the way Halifax have done it on their Stepped Income Reserve account.

AER 5.25%. Top rate in year 5 is 6.25%.

RayWolfe

Nationwide do it slightly differently:
"Nationwide’s 3 Year Stepped Rate Bond offers interest rates that are guaranteed to increase up to 5.00% gross p.a./AER in year 3"
Clearly there are no rules when it comes to these accounts. Milarky has a good point.

Reaper

I hit the "Like It" button as I think MSE should do a piece on misleading AERs.