Abbey Flexible Plus Mortgage Account

tonytsdiver

I put a question to the Abbey mortgage team today re my Flexible Mortgage Account.
" After depositing a lump sum of money into the 'Savings Account' in an effort to reduce my mortgage interest,will that lump sum be subject to the usual £35 k guarantee from the FSA or will it match the balance on my mortgage".

I was passed around various departments without an answer...nobody actual knew!
Eventually I was told that Abbey would guarantee the amount held in the Savings Account,should Abbey go under,beyond the FSA's minimum of £35 K
I asked for conformation in writing but was given a phone conversation number to quote for future reference.
I'm about to deposit a lump sum with them via this arrangement.Should I have any cause for concern ?

UK007BullDog

If you are concerned then use the money to actually pay off part of the mortgage instead of offsetting.

silvercar

There can only be two possible outcomes:

The net amount that you have with that instituition is what counts, so the savings balance will be netted off the mortgage and your mortgage balance reduced;

or, the savings are protected upto the 35k (70k for joint accounts) and the mortgage is separate.

Either way your money is safe, even if you've lost the liquidity by having it reduce your mortgage balance.

There was an article on a similar subject in the Sunday Times this week. (P3 of Money if anyone has the paper). It talked of the FCSC saying customers may only be able to claim (for loss of savings in the event of a institution failing) if there was a net positive amount with that brand. So if you have a mortgage with say first direct and savings with HSBC you could lose the liquidity of your savings.

The real concern is if you have a very large offset mortgage with a large pot of savings, are the savings above 70k protected or not?

silvercar

Just a thought, if Abbey have gone bust they won't be in a position to guarantee you anything! It would be upto the FSCS to pick up the pieces, so the guarantee needs to come from them not Abbey.

tonytsdiver

silvercar wrote: »

The real concern is if you have a very large offset mortgage with a large pot of savings, are the savings above 70k protected or not?

Yes, it's over £ 150 k. The idea is to keep a look out for a bargain holiday home maybe sometime in the near future so the ability to draw on the money is important. I take your point about the guarantee with Abbey, I need that guarantee from the FSA really.

jill2002

Even if you paid the amount off the capital of your mortgage, you would still be able to release it easily in the future as your credit limit has been set at the original amount. The only difference is that it would reduce your monthly payments- as there is a lower capital balance. However, you can choose to pay a higher amount each month, which would then pay the mortgage and the extra would chip away at the balance.

I don't know the answer to your original question, but remember that the money sits in the mortgage account - there is a savings 'pot' within that mortgage. So I would imagine that your money is safe, but if you place the money as above - it will still be available to you.

silvercar

jill2002 wrote: »

I don't know the answer to your original question, but remember that the money sits in the mortgage account - there is a savings 'pot' within that mortgage. So I would imagine that your money is safe, but if you place the money as above - it will still be available to you.

I don't know if your comment was solely about the Abbey, but my offset mortgage doesn't work like that. The offset savings account is completely separate. Choosing to pay money off the mortgage rather than put it into the savings account results in a lower mortgage balance. This would have the same effect as increasing the savings in terms of mortgage payments, but there is no right to retrieve this money at any time. If I wanted the money for any purpose I would have to apply to increase my mortgage and this wouldn't be automatic.

This is a big difference between current account mortgages and offset savings mortgage and I wonder whether the protection offered by FSCS would be different.

PBA

In an Abbey flexible mortgage there isn't a separate savings account, it's a part within the mortgage. Say you have a mortgage of £200k, but you've put £100k into the savings pot, you've actually got a mortgage of £100k but with an arrangement that you can borrow another £100k on the same terms with no notice.

So basically yes your savings are safe, as they're not really savings so the FSCS compensation wouldn't be needed (just if Santander was to collapse you'd owe their creditors £150k less due to the savings in the mortgage pot).

silvercar

Here is the FSCS details:

http://www.fscs.org.uk/consumer/faqs/deposit_claims_faqs/

I can't work out if 70k of my savings pot would be protected (with the rest lost) and my outstanding mortgage amount reduced, or all my savings would be netted off the mortgage and the outstanding mortgage reduced further.

In the event of the building society collapsing, I could cope with the reduced liquidity the latter would bring; I don't really want to lose my savings pot to thin air!

I know I could reduce my outstanding mortgage, but that wasn't the purpose of an offset mortgage. The point of taking it was to have access to funds.

jill2002

Silvercar

Yes this may just be specific to Abbey.

Optimisticpair

As it will be me who does the financial wizardry for both of us in very plain simple English please -

How does an Abbey Flexible Plus Tracker plus 1.43% Fast Track.
- product P080C- work?

It says - A savings account with Abbey is a condition"

So there is a savings account and a mortgage account?

We can make regular overpayments and lump sum payments. These can be allocated to the savings account or mortgage account. If an overpayment is made to the mortgage account it reduces the amount owed and interest is recalculated immediately. It is daily calculation.

Underpayments and payment holidays are possible if there have been sufficient overpayments. I assume it means that the overpaid money is 'gone' but could be retrieved for an emergency - is that correct?

What about the sum in the savings account - it is somehow 'linked' . That I assume is always accessible, right? Withdraw cash or pay by debit card for something and this is where the payment into the mortgage account comes from?.

Does the savings account amount get taken into account when calculating the amount of the mortgage outstanding?

Thanks in advance.