How Secure are my savings

dot22

I have a morgage of £110,000 and savings of £150,000 with the same bank. Am i correct in saying if the bank went bust my savings would be fully protected ie my £110,000 debt would be cleared using my savings and the £50,000 bank protection scheme would cover the remaining £40,000 savings

JamesU

dot22 wrote: »

I have a morgage of £110,000 and savings of £150,000 with the same bank. Am i correct in saying if the bank went bust my savings would be fully protected ie my £110,000 debt would be cleared using my savings and the £50,000 bank protection scheme would cover the remaining £40,000 savings

Welcome to MSE. You should not keep more than £50K in savings with a single group of banks ("institution") under the same FSCS licence. Fuller details and explanations can be found by pressing the link here:

http://www.moneysavingexpert.com/savings/safe-savings

JamesU

G_M

"A piece of minutiae in the Financial Services Compensation Scheme rules dictates that if you have debts, such as a mortgage, loan or credit card with a bank that you also have savings with, any outstanding debts will be subtracted from the savings. For example if you have £20,000 in savings and a £15,000 loan, in the unlikely event that bank went bust you'll only get £5,000 compensation. " (from here)

So yes, you would get £40K compensation and your debt would be wiped out.

Although you have not mentioned this, have you considered paying of (part of) your mortgage? What interest rate are you paying and what are you getting? And are you tied in?

JamesU

G_M wrote: »

"A piece of minutiae in the Financial Services Compensation Scheme rules dictates that if you have debts, such as a mortgage, loan or credit card with a bank that you also have savings with, any outstanding debts will be subtracted from the savings. For example if you have £20,000 in savings and a £15,000 loan, in the unlikely event that bank went bust you'll only get £5,000 compensation. " (from here)

So yes, you would get £40K compensation and your debt would be wiped out.

Although you have not mentioned this, have you considered paying of (part of) your mortgage? What interest rate are you paying and what are you getting? And are you tied in?

News to me, thanks for this GM. Still would not chance it personally.

JamesU

anamenottaken

G_M wrote: »

... if you have debts, such as a mortgage, loan or credit card with a bank that you also have savings with, any outstanding debts will be subtracted from the savings.

Makes perfect sense to me.

If you have a loan from an institution and savings with them (even joint accounts), there will always be in the T&C that, if you default on the loan repayment, they can take money from your other accounts.

If the bank/BS went belly-up, then they would need to call in the loans where they could. So they would take the money from the savings account. Whatever funds, if any, were left would be subject to the normal protection limits.

However G_M is right to suggest looking at making a payment against the mortgage - unless the money in the savings account are there temporarily pending the purchase of a second property perhaps.

dot22

Thanks for Info my morgage rate is 0.99% above base rate for the life time of the morgage (25 years) so at the moment it is better in savings. I am also getting 3.15% on my savings. The morgage is fexi so can put money in or take out with no notice or penalty.

One other point it is a joint morgage so will only 50% of the morgage be repaid from my savings

ESKIMO

Technically speaking you would be 'safe' under the FSCS as it is per finanical institution.

However, consider this option... Case Studies Northern Rock and Bradford & Bingley.

If the bank went into administration and was part-nationalised, with the high-street branches and retail deposits being 'sold off' to the 'highest bidder' (so to speak) and the mortgage book was subsequently nationalised. What would you do then? Bare in mind they are still operating! Do you know your rights in this case?

Reaper

ESKIMO wrote: »

If the bank went into administration and was part-nationalised, with the high-street branches and retail deposits being 'sold off' to the 'highest bidder' (so to speak) and the mortgage book was subsequently nationalised. What would you do then? Bare in mind they are still operating! Do you know your rights in this case?

You clearly don't and are just creating confusion.