What does it mean?

Legacy_user

We have a Barclays account attached to our Woolwich mortgage with a substantial overdraft facility. We've had it some time and it with the mortgage is due to be paid off in about 9 years.

Tonight we got emails from Barclays about changes to the terms and conditions on their accounts to do with something called Ring fencing.

We have used the overdraft facility to do some home improvements and make considerable payments into the account and also make all our mortgage payments in fact we pay lump sums off it whilst we can afford it. However we can't afford to pay it all off in one lump sum.

I have read the email and the accompanying notes but I don't understand what it all means and now I'm panicking that they will withdraw the overdraft facility and ask us to pay it off before we had budgeted for.

Does anyone know what the changes Barclays are making mean?

eskbanker

There are further details at https://www.home.barclays/about-barclays/ring-fencing-explained/ring-fencing-personal-banking.html but I don't see anything in there that suggests an increased likelihood of overdraft withdrawal, it's meant to be an administrative change.

Having said that, overdrafts are intended for short-term borrowing to ease cashflow issues rather than long-term borrowing, so, especially bearing in mind overdrafts can be withdrawn at any time, you'd be better to restructure your finances so as not to be reliant on your overdraft. Using an overdraft to fund home improvements and planning not to repay for over nine years is an risky and expensive way of doing things, could you not have increased or extended the mortgage?

If I understand your post correctly you're overpaying on your mortgage while keeping the overdraft, but I'd have thought it would make more sense to pay off the overdraft before the mortgage....

Edit: that linked page explicitly states:

Will my overdraft be affected?
No. Overdrafts won’t be affected by this change and you can continue to use this facility as normal.

JuicyJesus

It's purely administrative and should not affect your overdraft or any other aspect of your banking arrangements. All that is happening is the legal entity providing your account is changing from Barclays Bank plc to a subsidiary of Barclays Bank plc.

PeacefulWaters

Having said that, overdrafts are intended for short-term borrowing to ease cashflow issues rather than long-term borrowing, so, especially bearing in mind overdrafts can be withdrawn at any time, you'd be better to restructure your finances so as not to be reliant on your overdraft. Using an overdraft to fund home improvements and planning not to repay for over nine years is an risky and expensive way of doing things, could you not have increased or extended the mortgage?

Normally I'd agree with this.

It's possible that the OP is using the old Woolwich offsetting style mortgage (did they call it Open Plan?) in which case its likely to be an overdraft at mortgage rate within a legacy product that used to thoroughly encourage such an approach.

System

Yes we have an Open Plan mortgage. The overdraft facility was halved a couple of years ago. Probably due to the decrease in value of properties over here and so I assume they figured that the equity in our property was less and didn't want us using too much. At one stage we could have spent £80k if we wanted to :shocked:.
We didn't but in the last year we have done the kitchen and bathroom and used some of the overdraft for that and don't want they to ask for it all back now.