mortgage and savings with same institution is it sage

lobbyloo1

With all the uncertainty with the savings security situation i wanted to clarify the situation if you have a mortgage and savings with the same institution. I heard on one of the financial experts on tv say that if a bank went under the finacial guarantee on your savings would be offset with any mortgage outstanding, therefore you would only have the net balance, ie. a reduced mortgage but not cash savings. Is this the case can anyone clarify
thanks

whu

this is the case if your mortgage/savings are with the same bank eg if you have an offset mortgage with a bank - £200K mortgage and £100K savings - you will be left with a £100k mortgage but your savings will have gone to offset the mortgage
PS I think the situation is different for building society's - you would have to check their T & C

nzseries1

That is exactly the sage.

lfc84

so, if i have a mrotgage and savings with my bank and my bank goes bust, my mortgage is reduced by the savings. so my mortgage is less.

but if the bank is bust surley i owe no money ?

MarkyMarkD

If you have savings and a mortgage with the same bank, then if it goes bust the two are offset and the remaining balance - whichever way it is - is the amount due to/from you. At that stage the FSCS kicks in, so you get your first £50,000 if there is a net amount owing to you.

You don't lose any more by having money in the same institution. Indeed, if you have more than £50,000 in an institution but owe them more than your savings, you are 100% protected against losing a penny - your compensation limit is the full amount, effectively, because the offset occurs before the limit kicks in.

Statements like

lfc84 wrote: »

but if the bank is bust surley i owe no money ?

are just silly. If your bank goes bust, you still owe them the money. It makes no difference to your debt at all. The bank's administrators will sell your mortgage on to someone else and you'll repay them, instead of your bank, in due course.

silvercar

Not definitely true in the case of some building societies. See this recent article in the Times:

http://www.timesonline.co.uk/tol/money/savings/article4881428.ece

Even the FSCS guidelines say your savings may be offset against the mortgage balance, not that the definitely will be.

MarkyMarkD

Interesting, silvercar.

Definitely OK for banks, and I suppose that most people who have offsets have them with banks. But whether it's a formal offset or not, the same benefit would apply.

silvercar

MarkyMarkD wrote: »

Interesting, silvercar.

Definitely OK for banks, and I suppose that most people who have offsets have them with banks. But whether it's a formal offset or not, the same benefit would apply.

Not if your mortgage offset account contained more than £50k (£100k for joint):(

lobbyloo1

Thanks for the advise, we do not have offset mortgage just savings with bank and mortgage with C&G therefore under FS same institution. Will need to think if best to leave to see result of latest government assistance or move somewhere else so at least keep assess to funds we have set aside to manae my illness. At least clearer on situation

MarkyMarkD

Silvercar

I don't understand what you are saying.

If you have both savings and mortgage with a bank, then it doesn't matter if your savings are over £50k as long as (savings - mortgage) < £50k.

silvercar

According to the Times article I linked to earlier (and the use of the word "may" in the FSCS FAQ) if you have savings over 50k the extra could be lost and the 50k netted against your mortgage.

So 200k mortgage, 75k savings could become 150k debt if the lender went bust, because only 50k of your savings would be protected.