Say Your Bank / Mortgage Supplier Went Bust...

[redgriff500]

I know that its unlikely and I know what happens regarding your savings G teed to a certain amount etc.

BUT I have an offset account so my Mortgage and savings are linked so lets say I have a 500k mortgage and £450k in my offset account and the bank goes bust.

Do I just owe £50k ?

Or do I owe £500k and only get a small percentage of my 'savings' back ?

(Why do I get the feeling its going to be the latter ?)

Thanks

[Zod]

That is a very good question. I'd suggest a careful reading of the account terms. You should be OK, as the amounts should be netted, but I'd still check.

[Welshbeef]

Zod said:

That is a very good question. I'd suggest a careful reading of the account terms. You should be OK, as the amounts should be netted, but I'd still check.

+1 I'd certainly check the T&C ask them on the phone and get a letter in writing. Or/and on the day the bank goes belly up phone them up/online full transfer into mortgage account not just the offset part.

[scotal]

fscs website said:

5. What happens if I owe money to a bank, building society or credit union that fails?
Amounts owed to the failed firm (for example, loans, mortgage or credit card debts) are taken into account before any compensation is paid.

If you are a borrower with the same firm this may affect the amount you can claim, as the amount of your deposits may be 'set-off' against any amounts you owe.

If a bank or credit union were to fail, FSCS would consider a depositor's overall net claim. If the borrowings exceeded the depositor's savings, there would be no overall claim against the bank or credit union, and the depositor would not be entitled to any compensation.

For example, if a depositor had a mortgage of £200,000 and savings of £150,000 with the same bank, set off would be applied by the Insolvency Practitioner dealing with the bank failure. As a result, the depositor would end up owing the bank £50,000, so there would be no positive balance and no claim.

If a building society were to fail, FSCS may provide compensation for the overall net claim (as given in the above example). However, it is important to note that if you are a borrower with a building society, different arrangements may apply as there is no automatic 'set-off' on insolvency. However, contractual set off may still apply (particularly in the context of offset mortgages). and set off in the insolvency might be ordered by the court.

FSCS is the financial services compensation scheme, so these are the people who mop up in the event of a bank failing.
My bold.

[OnlyMX5ives]

Thanks for the replies.

As I'm with a bank it seems that I'm 'secure'.

I know its highly unlikely to occur but I'd kick myself if it all went wrong and I lost everything for not asking the question.