Are savings safe in an offset mortgage?

moneyquestion

Hi, can anyone let me know if money (£50K+) that is offset against a mortgage is safe in these current markets. I don't want to pay off my mortgage, but just want to use the offset to bring down my monthly payments. If I spread the money around, it means my mortgage payments will go up about £1k a month.
Thanks for any advice.

opinions4u

Safe because the government is propping up the banks, so nothing to worry about.

Safe in the respect that if your lender did go bump your savings would be paid off your mortgage.

http://www.fscs.org.uk/consumer/FAQs/Deposit_claims_FAQs/

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.

debbie42

This has been asked a few times, so if you do a search for, say, "offset" you should find a few discussions.

Basically, if you have an offset mortgage, the FSCS will work out the overall debit (or credit) when working out compensation. So your offset isn't actual savings unless it's bigger than your mortgage owed.

opinions4u

debbie42 wrote: »

This has been asked a few times, so if you do a search for, say, "offset" you should find a few discussions.

Basically, if you have an offset mortgage, the FSCS will work out the overall debit (or credit) when working out compensation. So your offset isn't actual savings unless it's bigger than your mortgage owed.

This applies to non-offset as well in the case of a bank going bump. So if you have £60k in savings and a £90k mortgage, your savings go but you only have a £30k mortgage left over.

silvercar

Is your lender a bank or building society? Some building societies won't apply offsetting in the event of their demise, so you would risk having only 50k of your savings set against the mortgage and lose the rest. Its a bit theoretical given the governments recent support. Note the word "may" in the FSCS quote above. There was also an article in the times recently describing this:

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