All Savings offset in Barclays - how safe?

busy_b

I have offset my savings against my mortgage with Barclays (36k), with all the hype on here I want to know how I stand.

It's apparantly only £1000 over the amount guaranteed by the government and so I may just pay off a couple of thousand to insure myself but is this necessary?

I literally complete on Friday after months of deliberation, I'm not panicking but just want to know how I stand or if I could, should I pull out now?

Your thoughts appreciated! Thanks.

SquatNow

It's not the "government" technically that provides the guaranty, it's the banking system.

If a bank goes tits-up the other banks have to have a whip-round and come up with £2bn between them.

If you've got £36k in saving why don't you use them to pay-down your mortgage properly... shorten it by 10 years.

busy_b

It seemed a good idea to just leave it offsetting so that we had access to it because once it's used to pay off the mortgage it's gone.

It's interest only and so competely offsets and we don't need to pay anthing monthly so the amount we would have paid goes into savings.

We intended to pay off say 5k a year if we hadn't touched the savings and gradually pay it off that way.

silvercar

I thought (but I may be wrong) that the protection scheme covers the net amount with an institution. So in your case the net amount would be zero.

SquatNow

Your best bet is always to pay off your mortgage as fast as you can. The faster you pay it off the less interest you pay, and the less exposed you are.

RabbitMad

If a bank goes bust the creditors all queue up to get their money back. However you are not a creditor, your are a debtor.

However the government will not let any of the big banks go bust, while their assets outstrip their liabilities they will be loaned money by the BOE

SquatNow

RabbitMad wrote: »

while their assets outstrip their liabilities they will be loaned money by the BOE

Of course if house prices drop the banks will also technically be in negative equity and unable to get loans from the BoE.

The BoE is loaning money to Northern Wreck secured against specific high-quality assets. If a bank doesn't have enough high-quality assets then the BoE will only lend to them on an overnight basis rather than the 3 month basis that Northern Wreck are getting.

Alan_M_2

If you want a reality check on the likely hood of Barclays ever falling into this position, have a chat with City Index, or even Ladbrokes and ask them for the odds of Barclays failing to this extent.

I'd hazard a guess the odds would be in the region of Elvis appearing on the moon Driving Cliff Richards Double Decker bus.

But don't take my word for it....ask yourself. You could probably place a £1 at 35000-1 - consider it you're own insurance policy.

busy_b

I am totally confused now! (doesn't take much).

If I have £36,000 in savings (even though they are not receiving interest they are still classed as savings) then what's this about a net amount of zero Silvercar?

Surely the fact that I am offsetting my savings against my mortgage wouldn't exclude me from any government guarantee or would it?

wolvoman

SquatNow wrote: »

Your best bet is always to pay off your mortgage as fast as you can. The faster you pay it off the less interest you pay, and the less exposed you are.

But that's the whole point of an offset, you don't need to do that. The £36K that the OP refers to is already being used to reduce interest - then it's his/her choice to use that saving for paying the mortgage off early or for having lower payments.

devils_advocate

Assuming mortgage is £150k, savings £36k, you owe them £114k, if they go bust.

I do hope that if they go bust you're not wanting to forget the mortgage repayment, but reclaim from the guarantee fund?