offset mortgages and bank failure

darkshepherd

What happens to those with offset mortgages who have a positive balance in the current account (ie they have not drawn down the whole amount) and a bank goes bust? Do they lose the cash (assuming they have more than £35k)and become liable for the whole amount of the mortgage available?

debbie42

Your debts and credits are offset, so if you are in overall credit, (i.e. no mortgage facility used at all) although you may still have the mortgage facility, you don't actually owe them that amount.

isofa

darkshepherd wrote: »

What happens to those with offset mortgages who have a positive balance in the current account (ie they have not drawn down the whole amount) and a bank goes bust? Do they lose the cash (assuming they have more than £35k)and become liable for the whole amount of the mortgage available?

This has been covered several times, and I posted about it a few minutes ago here on page 27: http://forums.moneysavingexpert.com/showthread.html?p=14621045

For simplicity, read these links:

http://forums.moneysavingexpert.com/showthread.html?t=1036075

http://forums.moneysavingexpert.com/showthread.html?t=863025

And for clarification: http://www.fscs.org.uk/consumer/FAQs/Deposit_claims_FAQs/

whu

Debbie

Could you please just confirm the following - if you had a mortgage for £300K and offset savings of £100K and the bank went bust would they take the £100K into account thereby leaving you with an outstanding mortgage of £200K?

debbie42

whu wrote: »

Debbie

Could you please just confirm the following - if you had a mortgage for £300K and offset savings of £100K and the bank went bust would they take the £100K into account thereby leaving you with an outstanding mortgage of £200K?

Yes, that's it. Effectively, the 100K isn't considered as savings, it's just reduced your outstanding mortgage to 200K. You'd only be in overall credit if you'd "saved" more than your mortgage.

dmac330

I still don't geddit

If I have a mortgage for £40k and savings of £60k offsetting this in the same institution. (I like to maintain the liqidity of being able to use £30k at any moment). What is my position if the institution goes pop with the current savings guarantee at £35k.

Is it deduct the mortgage and my remaining £20k is returned from the guarantee scheme.

Or is it you are above the £35k limit in savings so only £35k is guaranteed and that is all you "get" with the mortgage still to pay.

All the previous examples have sums which operate below the £35k limit i.e. £15k loan and £20k savings. What happens if its a £15k loan and £55k savings. I would hope £35k back - loan over. But if savings are above £35k is it just £5k back.

Any ideas

debbie42

dmac330 wrote: »

If I have a mortgage for £40k and savings of £60k offsetting this in the same institution. (I like to maintain the liqidity of being able to use £30k at any moment). What is my position if the institution goes pop with the current savings guarantee at £35k.

In this scenario, you are in credit for £20K. You'd get your £20K back via the FSCS scheme.

whu

I wonder if anyone could clarify something for me - if a bank went bust and you still had a mortgage with it would you just carry on paying the mortgage to the creditors on the same terms as you had originally with the bank?Also,if another bank took over the failed bank instead would they just take on the mortgage on the same terms so you would just pay them the mortgage payments as you did with the old bank?

Thanks.

whu

Any ideas please?

Thanks

opinions4u

whu wrote: »

I wonder if anyone could clarify something for me - if a bank went bust and you still had a mortgage with it would you just carry on paying the mortgage to the creditors on the same terms as you had originally with the bank?Also,if another bank took over the failed bank instead would they just take on the mortgage on the same terms so you would just pay them the mortgage payments as you did with the old bank?

Thanks.

Yup. Just keep paying under the same T&C.

Eventually your mortgage will either be sold off to another lender (normal market conditions) or taken over by HM Government (crisis market conditions).