Offset Mortgage - Dangerous Risk Potential???

fairestcape

I have an offset mortgage with Woowich (Barclays)

Mortgage is £185k

This is offset with a savings account of £150k

Now, if/when Barclays goes bust, will they do the honourable thing and simply nett things out, taking my £150k and deducting it from the £186k - leaving a mortgage of just £35k...?

... or will they keep my £150k for directors' leaving bonuses, and tell me to ask Mr Darling to give me just £50k back for my savings?

An then still insist that I have a £185k mortgage...

Advice please!

boyse7en

You'll be chased for the £35k if they go under, by whoever is the liquidator.

jackomdj

I have read various articles all saying offsetting is one of the safest bets at the moment as they will net it off....which is great unless you actually need some of the savings, say for a tax bill etc! We do have this worry, as OH & I both run small businesses - but I think it is a safer place to have your money than a lot of options (IMO)

HTH
Nicky

lisyloo

Yes you won't lose your money but you will lose the liquidity of your savings.

whu

They will offset your savings against your mortgage and therefore you will have a smaller mortgage but your savings would be used up - I suppose the downside is that you would lose liquidity but the upside is that all your savings would be utilised (to reduce the mortgage) even though they are over the £50K limit

silvercar

Not always the case, for certain building societies there is no automatic offset applied in liquidation. Here from the FSCS in their FAQ:

"5. What happens if I owe money to a bank, building society or credit union that fails?

Amounts owed to the failed firm (for example, loans, mortgage or credit card debts) are taken into account before any compensation is paid.
If you are a borrower with the same firm this may affect the amount you can claim, as the amount of your deposits may be 'set-off' against any amounts you owe.
If a firm were to fail, FSCS would consider a depositor's overall net claim, which would include taking into account any amount owed which the firm may set off.
In the event that set off is applied, and if the borrowings exceeded the depositor's savings, there would be no overall claim against the failed firm, 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 may be applied by the Insolvency Practitioner dealing with the bank failure. As a result, the depositor may end up owing the bank £50,000, so there would be no positive balance and no claim for compensation. "

Note their use of "may", if sett off isn't applied your savings would only be protected upto the limits of 50k single/ 100k joint.

Locoblade

You don't even lose liquidity really, if it got to the point where all your assets / debts are piled into one, then you can assume the mortgage arm of the company hasn't been taken over by another lender, in which case you'd be free to remortgage with another lender. If you want to release your liquid cash, just remortgage for the original £185k amount (not the reduced amount) and you're back to where you started, a mortgage of £185k with cash of £150k, which can be put back in the offset pot of the new mortgage.

whu

silvercar wrote: »

Not always the case, for certain building societies there is no automatic offset applied in liquidation. Here from the FSCS in their FAQ:

"5. What happens if I owe money to a bank, building society or credit union that fails?

Amounts owed to the failed firm (for example, loans, mortgage or credit card debts) are taken into account before any compensation is paid.
If you are a borrower with the same firm this may affect the amount you can claim, as the amount of your deposits may be 'set-off' against any amounts you owe.
If a firm were to fail, FSCS would consider a depositor's overall net claim, which would include taking into account any amount owed which the firm may set off.
In the event that set off is applied, and if the borrowings exceeded the depositor's savings, there would be no overall claim against the failed firm, 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 may be applied by the Insolvency Practitioner dealing with the bank failure. As a result, the depositor may end up owing the bank £50,000, so there would be no positive balance and no claim for compensation. "

Note their use of "may", if sett off isn't applied your savings would only be protected upto the limits of 50k single/ 100k joint.

Thanks - I thought banks automatically offset but that BS MAY only offset but note from your post that banks do not have to offset