Saving with your mortgage provider

Bromley86

I had a question about mortgages, savings and liability.

Does anyone know definitively what happens if a mortgage provider goes under and you have a £100k mortgage and also £50k in instant access savings with them? I've always thought that the two get netted off and you get a demand for repayment of £50k in the post, but I've never seen this confirmed by an official source.

Or would you have to claim the £50k from the FSCS and receive a demand for repayment of the full £100k?

Any links to somewhere confirming which way it is would be appreciated.

EDIT:

Found some more on it. Per noh, as of January 2011 you now get paid up to £85k from the FSCS first and then settle up with your mortgage provider. Anything in excess of £85k in savings would be netted off. So if we double the amounts in my example, you'd get £85k from the FSCS and owe 200-15=£185k to the mortgage provider. Net effect, you still owe them the £100k net, but you have the flexibility of having the £85k cash in your pocket.
https://forums.moneysavingexpert.com/discussion/3369702

So the next question is what would happen in the tin-foil hat scenario where the FSCS cannot pay out? Would the insolvency regulations require the offsetting of the up to £85k, or is that liability transferred immediately and irrevocably from the bank to the FSCS?

opinions4u

Google FSCS and give them a call.

My understanding is that with the exception of a small number of offset arrangements your £50k savings would be returned to you and your mortgage debt will remain as is at £100k.

They used to get netted off, but this changed at the end of last year.

oldvicar

I think the FSCS rules changed at the end of last year, such that your savings (up to £85K) are not necessarily netted off.

BUT, I keep getting new Terms and Conditions for savings accounts, in which the deposit takers explicitly take back the right to use your savings to pay off your debts, IYSWIM. I think this means back to square one, but happy to be corrected by an expert.