Offset balance above Govt guarantee

monkeyman1974

good morning - hopefully a simple question..

wife and I have an offset mortgage with Abbey. Fortunately we are able to increase our "savings pot" beyond the £100,000 (2x £50,000) protection the UK Govt would afford us in the event of Santander/Abbey having problems.

question is, if we have say £150,000, would the full £150,000 be set against our mortgage balance; or would we only get £100,000 'credit'.

i've asked Abbey who told me over the phone that the full amount would be set against, but frankly that may will be a worthless assurance in the event of a problem.

as an aside, I appreciate there are still some better things we could be doing with the money (mortgage rate is 0.49% tracking above base for lifetime), ISAs etc which we are looking at as well

any help on the protection issue is appreciated

StuartGMC

I believe that you will have "no choice" in the allocation of the offset money against the debt, with the residual being passed back to you e.g.

Assume you have a £200k mortgage and £150k offset.
Bank goes under, so 200-150 means you owe £50k now, and the debt would be passed to another lender. You won't have the choice to ask for the savings back in other words.

Obviously if you had:
Mortgage £150k
Savings £250k (joint) then you would I think get the £100k back, but anything above this would not be guaranteed.

I hope that assists you in your planning and decisions on placing some monies under a different banking license (see Martin's article as so many are linked now) to give an emergency pot outside the offset. For us, it is slightly different as we intend to clear in October using offset savings, but we've run the risk of not having these if NatWest went under... thereafter we'll grow savings, investments etc and probably look to have Cash ISAs under separate license from current a/c & emergency savings and indeed Stocks & Shares ISAs. That should keep me busy!

monkeyman1974

StuartGMC wrote: »

I believe that you will have "no choice" in the allocation of the offset money against the debt, with the residual being passed back to you e.g.

Assume you have a £200k mortgage and £150k offset.
Bank goes under, so 200-150 means you owe £50k now, and the debt would be passed to another lender. You won't have the choice to ask for the savings back in other words.

Obviously if you had:
Mortgage £150k
Savings £250k (joint) then you would I think get the £100k back, but anything above this would not be guaranteed.

I hope that assists you in your planning and decisions on placing some monies under a different banking license (see Martin's article as so many are linked now) to give an emergency pot outside the offset. For us, it is slightly different as we intend to clear in October using offset savings, but we've run the risk of not having these if NatWest went under... thereafter we'll grow savings, investments etc and probably look to have Cash ISAs under separate license from current a/c & emergency savings and indeed Stocks & Shares ISAs. That should keep me busy!

thanks for that, the mortgage balance is c.£300,000, with a "savings pot" of £150,000 giving a net balance of £150,000.

my concern is the security of the savings pot, and I'm pretty sure it would be netted off the debt.

I'd not thought that the principle would be dismissed with my pot retained, and I agree with you, this is not possible,

Good luck with clearing yours. I'm going to try and balance getting safe income with a bit of liquidity.