How would a bank collapse affect an offset mortgage?

[Legal Beagles]

We have an offset mortgage worth about £48,000 and £28,000 of savings. What would happen to them if our lender went under?

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[Amethyst]

Re: How would a bank collapse affect an offset mortgage?

Q

We have an offset mortgage of around £48,000 with Intelligent Finance, which I now expect is part of Lloyds TSB. The various savings pots within this account reduce the overall daily mortgage debt to around £20,000.


Should the new superbank fail, how will these savings be seen? Are they
covered by the £35,000 government guarantee of safety or are they netted off against the outstanding mortgage and lost?
MH



A In the incredibly unlikely event that the newly-enlarged Lloyds TSB was allowed to fail, your savings would be netted off against the mortgage. But this doesn't mean they would be lost, just that they would be used to reduce the amount of your debt to the bank. You could easily get your savings back by remortgaging with another lender for the original amount of the mortgage loan.


So in your case, your savings of around £28,000 would be used to reduce your mortgage of £48,000 to £20,000. To get your hands back on this cash you would take out a new mortgage of £48,000.

Thats assuming your credit record is decent enough to borrow £48k