All Savings offset in Barclays - how safe?

SquatNow

busy_b wrote: »

You assume wrong, the mortgage is for 36k and my savings equal 36k, therefore, I owe them nothing if they go bust because they take my savings to pay off my mortgage !

I have chose not to "actually" pay my mortgage off, just in case I need access to the savings account at any point.

I don;t know what you're talking about with regards to anyone bailing me out, or reclaiming from a guarantee fund, I merely want to know how safe my savings are when they're being offset !

While your loan and saving may be with the same bank, they are seperate IMHO. I would suggest you speak to your bank and a solicitor who specialises in this, but I suspect you'de find that if they went bust you'de still owe them the money for the mortgage and you'de have to fight the FSA for your savings back.

Also, does your offset mortgage offset *exactly* at a 100% ratio...? As I understood it, it doesn't always work like that.

busy_b

Yep, with the offset I chose Barclays where one of the only one's that would allow me to offset on an interest only basis. I preferred this as I can now just forget about it and feel as though I have actually paid it off whilst having the piece of mind that I can access the 36k at any point if I need to.

The four hundred and odd pounds I would have been paying on my mortgage will now be placed into an ISA every year for as long as I can afford it.

All seemed quite clever and straight forward until all this talk of bank instability, etc....I know it's all highly unlikely with Barclays but would be just my luck !

SquatNow

The rule is simply: If you have doubts about the stability of your bank, act immediately.

A wise man once said, If your going to panic, panic early.

busy_b

Update:- Received E-mail from FSCS today - can anyone clarify and tell me if I'm covered for my Savings - on Hold too long at Barclays and the following response is as clear as mud to me!
have spoken to our Legal Department, and this is their response:-
Whether or not the mortgage and savings would be set off will depend upon whether the deposit taker is entitled to do so.
This would apply to an offset mortgage as well.

Accordingly, it would depend on the bank or building societies terms of business and the extent to which they were
entitled to set off the mortgage against any deposits for the purpose of quantifying the 'overall net claim'. The position of
building societies and banks is not the same under insolvency law, so that automatic set off may not apply on the
insolvency of the building society, whereas it would be automatic on the insolvency of a bank.

silvercar

I clicked "thanks" to thank you for posting the info. I don't understand what they are saying or the logic behind it.

Surely if a bank goes bust, it would not be in a position to rule on whether it terms of business allow it to set the mortgage against deposits. I would have thought that the FSCS should rule on the areas its scheme covers, after all they own the scheme.

busy_b

My thoughts exactly ! I've just got through to the Bank and their response was "Your Savings are covered - don't panic"
Seems a standard response considering I've been in a queue to speak to them for 40 minutes. Plus the girl on the phone had no idea what I was talking about with regards to offsetting!
Not very re-assuring...

Generali

My interpretation of that is that the FSCS may treat an offset mortgage as a line of credit depending on the T&Cs. If it's a line of credit then if Barclays go bust you can walk away owing nothing. If it's a mortgage and savings then you lose everything over 35k and 10% of everything between 3 and 35k.

That's just my interpretation but I've worked in banking for a fair old while.

silvercar

Generali, do you mean that the mortgage stays (as presumably it would be sold onto someone) and only the first 35k of savings protected?

I suppose the line of credit arguement could work with a current account offset mortgage as this gives a facility of £XX to draw on as and when you want. My mortgage is an ordinary offset, no current account, just a mortgage with a linked savings. Ihad thought it was safe as the FSCS FAQs talked of the net amount borrowed, but now I'm not so sure...

summerday

Gosh this sounds scary, I had pretty made up my mind that I would change to an offset mortgage next year when our tracker finishes its tie-in period, but hearing the possiblity of losing all the savings you offset if the bank goes bust makes an offset sound far less appealing.

Generali

silvercar wrote: »

Generali, do you mean that the mortgage stays (as presumably it would be sold onto someone) and only the first 35k of savings protected?

I suppose the line of credit arguement could work with a current account offset mortgage as this gives a facility of £XX to draw on as and when you want. My mortgage is an ordinary offset, no current account, just a mortgage with a linked savings. Ihad thought it was safe as the FSCS FAQs talked of the net amount borrowed, but now I'm not so sure...

That's my interpretation but I think I didn't make it clear. The guidance seems to be saying that in the case of a bank going belly up, the offset is treated net. For a building society it might be treated net depending on the T&Cs.

That raises some interesting points, most obviously what happens if you borrow a huge amount of money on an offset mortgage and think you've paid most of it off but haven't really?

If you're talking about losing 8k like the OP then that's bad but shouldn't be financially fatal but what about someone buying a 500k house?