offset mortgage

salex

what would happen if .....
you had an offset mortgage account with a bank
with the mortgage being £80K and you had £60K in the offset account

and the bank went into administration.

Savings are only guaranteed upto £35K

Would you lose £25K (ie £60k -£35k) while still being liable for the whole mortgage?

angelavdavis

Potentially as an offset is classed as a savings account.

catshark88

Ouch. I had better hope that Woolwich/ barclays does not go down the tubes then!

maninthestreet

Possibly not - your entire savings may be taken off the outstanding mortgage amount, so you would end up with a mortgage if only £20K, but with no savings.

silvercar

I have this dilemma. Wanting to add a lump sum to the offset in a couple of weeks that will take the offset savings balance over the protected limit and feel for safety I should reduce the capital instead. But the point of the offset was too allow access quickly and easily should I want the money and I know I will have to reapply for funds if I want the money back out.

Martinslovechild

Good Question - it's worth maybe asking Barclays themselves to see what their response is...

Arguably, the offset part of the mortgage is not really a savings account because it pays no interest, but that's just my opinion.

It's even worth asking the Financial Services Authority. Their number is 0845 606 1234 and their website address is http://www.moneymadeclear.fsa.gov.uk/about_the_fsa/contact/contact_us.html.

Please post back here if you receive a response.

angelavdavis

Its definitely an interesting point. My provider, Britannia BS definitely treats the offset as a savings account. I will be interested to see any response you get too.

Eydon

silvercar wrote: »

I have this dilemma. Wanting to add a lump sum to the offset in a couple of weeks that will take the offset savings balance over the protected limit and feel for safety I should reduce the capital instead. But the point of the offset was too allow access quickly and easily should I want the money and I know I will have to reapply for funds if I want the money back out.

I'm with Barclays/Woolwich. They provide a Mortgage Reserve account linked to my offset arrangement. It's basically a pre-approved amount of borrowing that I have access to. As I pay off my mortgage, so my Mortgage Reserve Account increases (usually in chunks of £1000). This money is available at any time (without having to fill in any applications) as long as I have the mortgage.

Does your provider not offer something similar?

Also, are your accounts in joint names? I may be wrong, but if they are don't they qualify for twice the protection?

Bubblette_2

I have an offest mortgage too and read in the Times a couple of weeks ago that if such a scenario happened then the savings part of the mortgage is classed as part of the mortgage and hence not savings and not protected if the bank went bust. But the point of the article was to say that new measures are afoot to recognise these savings as a separate account and hence you would get at least 35k back. Let's hope they hurry it up....

PasturesNew

silvercar wrote: »

I have this dilemma. Wanting to add a lump sum to the offset in a couple of weeks that will take the offset savings balance over the protected limit and feel for safety I should reduce the capital instead. But the point of the offset was too allow access quickly and easily should I want the money and I know I will have to reapply for funds if I want the money back out.

I used to have one of these accounts. I never really understood it (Woolwich made it impossible to understand their statements!) ... but I thought it didn't matter where the sums sat on the statement you could get at all of it, so if you paid off some of the mortgage, you could at any time move money from there across to the current account.

I was under the impression that what mattered was the total amount kicking about and the fact any mortgage was paid off by the time you retired.

Lunar_Eclipse

salex wrote: »

what would happen if .....
you had an offset mortgage account with a bank
with the mortgage being £80K and you had £60K in the offset account

and the bank went into administration.

Savings are only guaranteed upto £35K

Would you lose £25K (ie £60k -£35k) while still being liable for the whole mortgage?

I have an offset mortgage with First Direct and asked them this very question about a month ago. They said the answer is no. In this scenario, they would treat you as having a 20k outstanding mortgage.

BUT I was obviously the first/one of a few people to ever ask them this and so just in case, we have paid off some of the mortgage (we can reclaw it at any time - simple online account transfer) to avoid this potential situation. Thus in reality it makes no difference, except that we have protected our money (touch wood).