offset savings and the FSCS compensation, need clarification

rockrat

can somebody please help explain if my savings are at risk of not being covered over £35k on the compensation scheme by having a 200k mortgage and £150k in savings offset with the same institution. (i.e paying interest on just the remaing £50k).

if anything happened to the bank, do i end up just owing £50k to the creditors, or will i lose any of the savings over the £35k limit, and in effect end up with a £165k debt??

thankyou in advance

YorkshireBoy

http://www.moneysavingexpert.com/savings/safe-savings#collapse

Paul_Herring

YorkshireBoy wrote: »

http://www.moneysavingexpert.com/savings/safe-savings#collapse

The example (and text) doesn't actually make it clear - the example uses an amount less than £35k, and the text is ambigious since it doesn't specifically state that any savings over £35K would be used to offset the mortgage (as opposed to the just first 'guarateed' £35k)

YorkshireBoy

Paul_Herring wrote: »

...the text is ambigious since it doesn't specifically state that any savings over £35K would be used to offset the mortgage

You're correct Paul, this being the only loose reference...

"if your debts are bigger than your savings the amount owed would be reduced"

I've previously searched the FSCS site for Martin's "piece of minutiae in the Financial Services Compensation Scheme rules", but haven't been able to find it.

Paul_Herring

YorkshireBoy wrote: »

I've previously searched the FSCS site for Martin's "piece of minutiae in the Financial Services Compensation Scheme rules", but haven't been able to find it.

Not minutiae, but: http://www.fscs.org.uk/consumer/FAQs/Deposit_claims_FAQs/

3. What happens if I owe money to a bank, building society or credit union that

[...]

If a bank or credit union were to fail, FSCS would consider a depositor's overall net claim. If the borrowings exceeded the depositor's savings, there would be no overall claim against the bank or credit union, and the depositor would not be entitled to any compensation.

For example, if a depositor had a mortgage of £200,000 and savings of £150,000 with the same bank, set off would be applied by the Insolvency Practitioner dealing with the bank failure. As a result, the depositor would end up owing the bank £50,000, so there would be no positive balance and no claim.

Emphasis mine.

It looks like there's no 'limit' on savings if your debts exceed them - the limit only applies to a net positive balance.

To the OP, it would appear you'd owe £50k, not £165k.

YorkshireBoy

Thanks Paul, I obviously didn't look thoroughly enough! Then again it was a while ago and once I got my offset mortgage under £35,000 and 100% offset it didn't really matter (to me).

badm88n

I also have an offset and have been looking for clarification on the same. The following thread, though long, does provide an answer towards the end:

http://www.fool.co.uk/news/property-home/mortgages/2008/04/11/be-careful-with-offset-mortgages.aspx