Should I pay it off

Hello.I have a bit of a strange question that I hope someone  can help with.  We have moved heaven and earth and got into the position to be able to pay off the balance of our offset mortgage (0.8%)  of £300k. Now we are undecided as to the best course of action. My wife thinks we should put the entire amount into our offset account (Santander) meaning we would be paying almost all capital in our monthly mortgage repayments  and have the money to pay it off if required but also retain cash fluidity for any investment opportunity That comes our way. I agree but I am worried about a huge world economic crash that I believe may be imminent and how safe this cash would be against huge inflation or total loss? How safe is our money if it is kept in an offset account that is attached to the outstanding balance of our property? 
Thanks for reading 

Comments

  • LadyGnome
    LadyGnome Posts: 801
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    The Financial Services Compensation Scheme will only cover £170K in a joint account.  Whilst there is no reason to think your bank would fail I would be reluctant to leave more than that sitting in an account.
    Compensation limits | Check your money is protected | FSCS

    One option would be to pay down some of your mortgage so you are below the FSCS limit in the Offset. Another would be to spread your money and pay some mortgage interest.

    MortgageStart Nov 2012 £310,000
    Oct 2022 £143,277.74
    Reduction £166,722.26
    OriginalEnd Sept 2034 / Current official end Apr 2032 (but I have a cunning plan...)
    2022 MFW #78 £10200/£12000
    MFiT-6 #28 £21,772 /£75000
  • Brie
    Brie Posts: 9,355
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    Do you mean that you have an account that reduces the interest payable on the mortgage?  I have an RBS offset account for my mortgage which is just like having an enormous overdraft.  Any money I put into that account reduces the amount payable and therefore the monthly interest and if I put enough in there would be a credit balance.  But unless I tell RBS that I am reducing the mortgage amount to zero all the money is still available to me.

    If your account works the same way then you would need to have 170k more than you owe on your mortgage for there to be any concern about exceeding compensation schemes.
    "Never retract, never explain, never apologise; get things done and let them howl.”
  • rjbear
    rjbear Posts: 16
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    Generally speaking always best to pay off as much as you can although obviously need to do the sums to work it out.
  • LadyGnome
    LadyGnome Posts: 801
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    Brie - that is not always the case.  Some offset mortgages are work by linking savings or current accounts to the mortgage account but they are separate accounts.  The banks have the option of exercising their right of set off between the account but they are not obliged to do so.  The resolution of failing banks is horribly complex under the Special Resolution Regime and I wouldn't assume that the deposits in the linked accounts would automatically be allocated to the mortgage unless there is an express statement somewhere that will be case.  The security for the loan is the actual mortgage i.e. the legal transfer of ownership to the bank not the offset account. 
    MortgageStart Nov 2012 £310,000
    Oct 2022 £143,277.74
    Reduction £166,722.26
    OriginalEnd Sept 2034 / Current official end Apr 2032 (but I have a cunning plan...)
    2022 MFW #78 £10200/£12000
    MFiT-6 #28 £21,772 /£75000
  • Thanks for these answers, as usual it appears that my wife was right 
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