Are my Savings safe? Discussion Area

During the fun and games of the run on Northern Wreck or is it Northern Crock; I found myself thinking similar thoughts about a nest egg in Alliance and Leicester. Here are some links:

http://forums.moneysavingexpert.com/showthread.html?t=554131&page=2

http://forums.moneysavingexpert.com/showthread.html?t=556632

http://www.dailymail.co.uk/pages/live/articles/news/news.html?in_article_id=481778&in_page_id=1770&ct=5

I also 'phoned the A&L call centre and had an interesting chat with someone just going off duty on the Saturday morning:.................."Yes its been a busy night compared with normal; but we have had no real sense of panic".

Since then I have been slowly diversifying my deposits to keep below the 35K "guarantee".

It is all rather sad that the major problem is in USA BUT when USA banks start sneezing it is the smaller fry in the UK that catch the cold.

For those of you who still have a mortgage, ask yourself "Has it been "securitised" ie sold-on to some investment organisation. If it has, don't expect any sympathy if you need to 'phone and explain that a little local personal difficulty will mean being late with the payment this month. Some obscure financial institution has no good name to loose by putting you on the street; all it will be interested in is the loan to value in a falling market.

Harry.

So far.
After more than a dozen years of rising property prices, I am sure that there must be some very "iffy" behaviour out there. Such as the kick back for off-plan "investors" in BTL flats, identified by the Portman BS. It has made a mockery of the Land Registry price figures.
I am betting on a 15 - 20% property price fall before this is over.

How safe are my savings when offsetting?

Hope I'm in the right place - been advised to raise my query here as I've raised a few concerns in another forum.

I offset all my savings against my mortgage with Barclays.
36k savings offset 36k mortgage.
With all the hype I wondered if my savings would still be treated as savings when being offset.

I have received the following response from FSCS by e-mail today - Can anyone clarify?
have spoken to our Legal Department, and this is their response:-
Whether or not the mortgage and savings would be set off will depend upon whether the deposit taker is entitled to do so.
This would apply to an offset mortgage as well.

Accordingly, it would depend on the bank or building societies terms of business and the extent to which they were
entitled to set off the mortgage against any deposits for the purpose of quantifying the 'overall net claim'. The position of
building societies and banks is not the same under insolvency law, so that automatic set off may not apply on the
insolvency of the building society, whereas it would be automatic on the insolvency of a bank.

Can anyone clarify this one. If I have a joint account with a very small balance and we both have seperate accounts ,how does the 70K not at risk worth. If I add all the accounts together they come to under 70K, however the accounts in one sole name come to more than £35k. I am wondering if I need to move some money or if the £70k in total rule applies if the other holder can pay in more. Hope this is clear,thanks in advance for any help

busy b, I can clarify that offset answer a bit.

Banks have a right in law to offset your debts on one account against your credits in other accounts. So a bankrupt bank could apply all of your credit balances against your debit balances. Hence it appears that the FSCS answer is that your mortgage balance with a bank will first be reduced by any credit balances in your own or joint accounts before working out whether you've lost any money.

In this case you haven't lost money, it's just been applied to the mortgage and you could remortgage with another lender to get back the split between offset credit balance and mortgage debt balance.

If your total deposits exceed the mortgage, deduct the mortgage value from the total deposit value to work out how much is at risk.

This appears to favor saving with a bank with which you have a mortgage, when the bank has a right of offset, since the mortgage debt seems to protect your savings balances.

Similarly it seems to favor depositing with the building society with your mortgage if and only if it has a right of offset against the savings to repay the mortgage - the right to take your savings to repay the mortgage. This is not automatic as it is with banks so it seems necessary to verify in each case.

This also appears to clarify the situation with flexible mortgages with right to draw down overpaid amounts, you'd lose the right to take the money out and would need to remortgage to do so. But you wouldn't lose the money, you'd just have your mortgage reduced until you remortgaged.