Offset Morgage guarantee?

Mark7660

Hi, can anyone tell me if an Offest Mortgage still has the £85K guarantee if the bank fails? I ask this because it is a different type of saving, so may come under different rules.

tlc678910

Taken from offset mortgage info for Yorkshire Building Society:

http://www.ybs.co.uk/mortgages/offset/index.html?cmpid=prsm1AOF

"Protecting your money: Deposits in the savings element of your Offset mortgage are covered by the Financial Services Compensation Scheme (FSCS), up to a total of £75,000 of the total deposits held with the following: Yorkshire Building Society, Barnsley Building Society, Chelsea Building Society, Norwich & Peterborough Building Society and Egg. Please refer to the FSCS Information Sheet (59 KB) or here for more information."

Probably best to confirm with the specific lender you use to be certain.

I think the protection for all financial institutions is reducing from 85 to 75K?

HappyMJ

Mark7660 wrote: »

Hi, can anyone tell me if an Offest Mortgage still has the £85K guarantee if the bank fails? I ask this because it is a different type of saving, so may come under different rules.

Usually yes but in very few cases if not you will owe the financial institution less as you can offset what they owe you against what you owe them. Re-mortgage with a different financial institution and you can release that equity again.

Even if you had more than £85,000 in the offset account the amount up to the amount owed on your mortgage is effectively going to be offset against the mortgage owed anyway so it's safe enough. You will not be expected to lose the amount in excess of £85,000 and be expected to repay the whole mortgage as well.

silvercar

HappyMJ wrote: »

Usually yes but in very few cases if not you will owe the financial institution less as you can offset what they owe you against what you owe them. Re-mortgage with a different financial institution and you can release that equity again.

Even if you had more than £85,000 in the offset account the amount up to the amount owed on your mortgage is effectively going to be offset against the mortgage owed anyway so it's safe enough. You will not be expected to lose the amount in excess of £85,000 and be expected to repay the whole mortgage as well.

I'm not sure this is always true. In the case where you have a net owed figure ie the savings are held within the mortgage account, the balance is always negative and so there is no concern. In the case where there is a mortgage and a separate but linked savings account, you pay interest on the overall net borrowing but the accounts are separate.

Imagine the very rare event that the lender failed. The mortgage book would be sold off, so the borrowing would go elsewhere and you would owe the total mortgage. The savings element would be separate and protected up to the £75k limit (£150k for joint borrowers). You could have a situation where you lose some of your savings but still have the large mortgage.

TrickyDicky101

There's an interesting response from the FSCS here:

http://www.property118.com/insolvency-compensation-rules-for-deposit-and-mortgages/38364/

which seems to imply that insolvency rules would prevent a consumer from only being protected up to £75k for his/her deposit whilst remaining liable for the entire mortgage owed.

mr_shinobi`

Just wondering if anyone else had any thoughts about this. I have an offset mortgage with First Direct - separate mortgage account and separate savings account, I believe, albeit linked. I spoke with them today, and they seemed adamant that I would not be able to offset any savings (in excess of savings protected under the FSCS) with any mortgage liability with them.

They did suggest that they may be wrong about this when I pointed to my interpretation of the FSCS guidance (which is that, under insolvency law - not the FSCS itself - any liabilities I have with First Direct will be offset against any assets I have with them in the event they fail).

Barclays Bank also suggested that their offset mortgage would work this way. However, First Direct kept repeating that only £75K of my savings in the offset mortgage would be protected under the FSCS (which I agree with), but that there was no insolvency law that would dictate that any excess savings (not protected under the FSCS) should be offsettable against the outstanding mortgage balance in the event that First Direct failed.

Anyone know what the position is, or why this confusion might exist? Thanks!

getmore4less

One scenario is the mortgage gets sold on before the insolvency.