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Offset mortgages and saver protection

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  • Offset mortgages and saver protection

    If you had an offset mortgage and the amount in the savings account was in excess of the £85k limit covered by the protection limit what would happen if the bank went bust.

    My (hopefull) thinking is that the full amount in the saving account should be deducted from the mortgage amount owed.

    Any ideas.

  • #2
    Re: Offset mortgages and saver protection

    From a Mortgage perspective, there are a few possible scenarios that could unfold. The bank in question may be acquired by a new bank and the mortgage would continue on the original terms until such time as your deal comes to an end and you switch to the Lender’s Standard Variable Rate – this may depend entirely on the bank in question. Another possible scenario is the bank goes bust and a receiver enters the frame, in this situation it’s possible that the receiver will contact you to offer you the chance to repay the mortgage balance owed at a reduced settlement figure, if feasible this could save you a large sum on the amount you were due to pay back.

    There are so many variables to this situation that it’s difficult to give a precise answer, much of what may happen may depend on the size of the bank in question and whether the bank is deemed “worth saving” due to the potential impact on the greater economy. In this situation the Bank of England and possibly the Government may become involved in brokering a deal to “save” the bank.

    As far as your savings go, that is something you’ll need to take up with the bank in question and ask them directly. When Northern Rock was on the brink, the “run on the bank” which was savings/current account Customers withdrawing or transferring their monies elsewhere almost led to a complete capitulation of the bank – some banks use the savings held within themselves as the base on which to lend money out, when those holdings start to dwindle at an alarming rate it de-stabilises the bank in question.

    I hope this helps a little!
    Ascot Mortgages
    www.ascotmortgages.co.uk

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    • #3
      Re: Offset mortgages and saver protection

      Originally posted by Millbrook View Post
      If you had an offset mortgage and the amount in the savings account was in excess of the £85k limit covered by the protection limit what would happen if the bank went bust.

      My (hopefull) thinking is that the full amount in the saving account should be deducted from the mortgage amount owed.

      Any ideas.
      So far as I understand it, anything over the £85k would be wiped out - gone.

      That is certainly what has happening in the past, for example, with the Icelandic banks when British savers lost billions due to their collapse.

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      • #4
        Re: Offset mortgages and saver protection

        Do not save more than the maximum that is covered - whether in a savings or offset account (which is effectively a savings account).

        Please let me know if you need any further help or advice.

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        • #5
          Re: Offset mortgages and saver protection

          Thanks for that, I was wondering the same thing.
          Large Mortgages

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