FSCS protection for off-set interest accounts

moneymatters2me

Hi all,

I am interested to know about savings protection specific to the off-set interest accounts that are around.

I have seen that simplistically, the FSCS protects savings of up to £35k per financial institution. I have also see the part where if you have savings and debt with the same financial institution, the "protected" £35k is used to pay back the debt which makes sense.

However if you increase the figures and for example have a £100k mortgage with an associated off-set saving account which has £60k in it what happens if the institution folds?

Does it work that your entire savings are netted off against your mortgage and you end up with a net £40k debt and no savings (ie. no worse off than you were, other than the flexibility to choose what to do with your savings)?

or

Does it end up that the "protected" return of £35k is taken off the debt, but then you lose the remaining £25k in the savings account and STILL have a debt of £65k ?

I couldn't find thgis specific question answered from what I've read, however I'm sure that it must affect a reasonable number of people.

debbie42

moneymatters2me wrote: »

Does it work that your entire savings are netted off against your mortgage and you end up with a net £40k debt and no savings (ie. no worse off than you were, other than the flexibility to choose what to do with your savings)?

It's this one: currently the scheme uses the net debt to the institution. There is a link somewhere to a discussion document: I'll see if I can find it.

edited:
This isn't the one I was thinking of orginally, but it spells it out well.
http://www.fool.co.uk/news/property-home/mortgages/2008/04/11/be-careful-with-offset-mortgages.aspx

moneymatters2me

Wow ! Thanks for the super speedy replies - that makes interesting reading - thanks for your help )