Melt-down Question

[cynic]

Can anyone answer or pontificate on this - maybe it's already been asked? In which case the link to the topic will do if anyone knows it....

That bastion of granny-bond-style investment, lunch-box live, was just on. I don't usually listen (honest), but there were a couple of tit-bits of minor interest; Some local councils are apparently exercising powers to compulsorily 'manage' empty properties. The presenter said that 13 or 14 (I think, it was between 10 and 20 anyway) such houses had already been taken into this scheme. Big deal eh? How many empty houses in the UK? 640,000? Pfffft!

The other item which leads to my question was about the £35k safety limit for FSA-covered saving schemes. It's a storm barometer of a kind that they're mentioning this now on such a program - there must be grannies galore who will not have known about such 'protection' - albeit laughably limited - and, in the final death throes, probably reneged on. I'd imagine a a hefty tranch of savings is going to get shunted about into 35k lots over the next week or so. Perhaps this will get the competition for saving accounts into a higher gear...

The question; assuming melt-down, and assuming one has a mortgage on a property with an outstanding loan of £100k AND savings in the SAME bank/BS of £100k+, might this result in an automatic full repayment of (or an option to settle) the mortgage, or could one conceivably lose £65 (the excess over the 35k) and still see a debt of £100k outstanding?

Any thoughts?

[Guest tbatst2000]

The question; assuming melt-down, and assuming one has a mortgage on a property with an outstanding loan of £100k AND savings in the SAME bank/BS of £100k+, might this result in an automatic full repayment of (or an option to settle) the mortgage, or could one conceivably lose £65 (the excess over the 35k) and still see a debt of £100k outstanding?

Interesting question and not an easy one to answer I don't think. In the case of credit cards, you'll most likely find that the legal entity issuing the card is separate from the one that you have your bank accounts with so you're stuffed. In the case of mortgages, it's a lot more complex - I would guess that, assuming the loan hasn't been sold on, and assuming that it's with the same entity as the savings, the two would be netted together for the purposes of insolvency and then, any loss after the numbers had been tallied up to 35K, would be covered by the FSCS. It's a legal minefield I suspect and one good reason to go for an offset mortgage where the relationship between savings and borrowings is explicit.

[Telometer]

I'd be surprised if they were netted off. There are two different relationships.

The bank has an asset (your mortgage) which would be sold on by the receiver to raise money to pay the bank's creditors.

You have an asset (bank deposit) which has disappeared, save to the tune of 35k.

[cynic]

Thanks for your reply t-2000. Now that I'm fully gripped by the sense of panic/adventure in this forum, it occured to me that some of my savings might be better wedded to the mortgage of a trusted friend than seeing us both losing out. I've not been mortgaged for some time so was unaware of the offset deal. At a guess - I'll know later today - my friend has a straight forward repayment deal so I suppose the only option would be for her to pay off the current loan and set up a new offset mortage? There's no short-cut conversion from one loan to the other I imagine?

I want to keep my savings as independent and liquid as possible in case I decide to do something myself but in the meantime make it fire-proof.

Telometer - thanks, you paint a bleak picture, more or less as I imagined.

[InternationalRockSuperstar]

http://www.moneyweek.com/file/35639/who-ca...-money-now.html

"The [british Financial Services] Compensation Scheme – it was revealed Tuesday – now holds funds of just £4.4 million. Total UK bank deposits, on the other hand, total some £1.6 trillion. ... in the ... event of a total collapse in British banking, the fund could offer only 0.00002% in compensation. "

Does that reassure you?

[cynic]

http://www.moneyweek.com/file/35639/who-ca...-money-now.html

"The [british Financial Services] Compensation Scheme – it was revealed Tuesday – now holds funds of just £4.4 million. Total UK bank deposits, on the other hand, total some £1.6 trillion. ... in the ... event of a total collapse in British banking, the fund could offer only 0.00002% in compensation. "

Does that reassure you?

No, nor does it surprise me! :angry:

[InternationalRockSuperstar]

No, nor does it surprise me! :angry:

[Guest grumpy-old-man]

http://www.moneyweek.com/file/35639/who-ca...-money-now.html

"The [british Financial Services] Compensation Scheme – it was revealed Tuesday – now holds funds of just £4.4 million. Total UK bank deposits, on the other hand, total some £1.6 trillion. ... in the ... event of a total collapse in British banking, the fund could offer only 0.00002% in compensation. "

Does that reassure you?

this is what always amazes me, even after they have it exlained to them. Head in sand for the majority it seems. (not the op it has to be said).

people have total trust in a system they know nothing/very little about, but trust it because it's 'the system'. I suppose I have been guilty of this myself, until I have had my eyes opened that is.

[laurejon]

Can anyone answer or pontificate on this - maybe it's already been asked? In which case the link to the topic will do if anyone knows it....

That bastion of granny-bond-style investment, lunch-box live, was just on. I don't usually listen (honest), but there were a couple of tit-bits of minor interest; Some local councils are apparently exercising powers to compulsorily 'manage' empty properties. The presenter said that 13 or 14 (I think, it was between 10 and 20 anyway) such houses had already been taken into this scheme. Big deal eh? How many empty houses in the UK? 640,000? Pfffft!

The other item which leads to my question was about the £35k safety limit for FSA-covered saving schemes. It's a storm barometer of a kind that they're mentioning this now on such a program - there must be grannies galore who will not have known about such 'protection' - albeit laughably limited - and, in the final death throes, probably reneged on. I'd imagine a a hefty tranch of savings is going to get shunted about into 35k lots over the next week or so. Perhaps this will get the competition for saving accounts into a higher gear...

The question; assuming melt-down, and assuming one has a mortgage on a property with an outstanding loan of £100k AND savings in the SAME bank/BS of £100k+, might this result in an automatic full repayment of (or an option to settle) the mortgage, or could one conceivably lose £65 (the excess over the 35k) and still see a debt of £100k outstanding?

Any thoughts?

There are no links whatsoever between the two. You will continue to owe 100k as your mortgage will be administered by another company appointed by the liquidator, and your savings will be protected to 35k provided the Government have the funds to protect it. Current forecasts by several analysts suggest the Government could not afford to repay the depositors of Northern Rock alone, let alone several large banks as well.

[laurejon]

The advice coming out of the City is to remove all savings from Banks, and repay all debts ASAP.

Maybe easier said than done, but its food for thought.

[wickywackywoo]

The advice coming out of the City is to remove all savings from Banks, and repay all debts ASAP.

Maybe easier said than done, but its food for thought.

Are you kidding? Who gave this advice? Very scary if true.

[Optobear]

this is what always amazes me, even after they have it exlained to them. Head in sand for the majority it seems. (not the op it has to be said).

people have total trust in a system they know nothing/very little about, but trust it because it's 'the system'. I suppose I have been guilty of this myself, until I have had my eyes opened that is.

I'm amazed too. That is why I always post on here if someone mentions the £35k in a positive way to correct the idea that it will actually work. I guess that it is no more odd than us all accepting (or at least going all with) fractional reserve banking?

[cynic]

The advice coming out of the City is to remove all savings from Banks, and repay all debts ASAP.

Maybe easier said than done, but its food for thought.

That doesn't surprise me either.

ok - I think I've got the answer, back of pad calcs show 1 box-room (aka 3rd bedroom) 2.5x3.0x3.0 metres will hold 1250 boxes of 6x0.75 litre bottles. A good single malt might fetch £40. That's a potential storage 1250 cases

1250*6*40 = £300K. Highly tradeable, long shelf life, inflation-proof.

[EmpiricalBear]

The advice coming out of the City

You need to justify this statement.

If people did this, then the system would indeed crash!

[dreamOn120k]

There are no links whatsoever between the two. You will continue to owe 100k as your mortgage will be administered by another company appointed by the liquidator, and your savings will be protected to 35k provided the Government have the funds to protect it. Current forecasts by several analysts suggest the Government could not afford to repay the depositors of Northern Rock alone, let alone several large banks as well.

Hang on, in an extreme situation a bank can call in a mortgage so it does not matter what distance you put between your liquid assets and the mortgage obligation unless you want to see your property put up for auction.

Second of course the Government can repay Northern Rock depositors, HGM would opt for printing money and all the implications of increased money supply rather than become the first major nation to default on a Sovereign debt obligation.

[Ash4781]

http://www.telegraph.co.uk/money/main.jhtm...urvival2008.xml

Financial crisis:A survival guide

Step-by-step survival guide

Are your savings safe?

Risk-free Isas

Equity funds for cautious investors

The best - but riskiest - Isas

Cash in on banking shares

How to invest in gold

[cynic]

(ahem....apologies for my diversion into whiskey hoarding)...

Coming back to my original question and looking for an alternative to t-1000's suggestion of the offset mortgage - which I think will be costly or difficult to arrange now - can anyone think of a way I can lend £100k to a friend with adequate protection for the loan?

[Telometer]

No.

If he buys or owns property you can get a charge over the property. Fix the interest rate at libor +2%.

As for investing in whisky, you can buy perfectly nice Malt (declassified Glenmorangay) in Lidl for £15 a litre. Why would I pay £30 a litre for the branded stuff?

Fine wines is in a massive bubble too. Buy Latour 2000 as they're not making it anymore (said Twain). But they're making 2008 as we speak...

[Not Long Now]

There are no links whatsoever between the two. You will continue to owe 100k as your mortgage will be administered by another company appointed by the liquidator, and your savings will be protected to 35k provided the Government have the funds to protect it. Current forecasts by several analysts suggest the Government could not afford to repay the depositors of Northern Rock alone, let alone several large banks as well.

I read somethind different (if Ive interpreted the question correctly - If I haven't, just disregard this).

However, my understanding is that if you have a 100k mortgage and 35k savings, and the bank goes pop, your savings will be deducted from any outstanding debt. This, apparently, goes for any savings that are held within any organisation that is part of the same banking group.

Therefore, if you have savings, it should be placed in a savings account with a different bank that is NOT part of the same group as any loans / mortgages you have, otherwise it will just be deducted off against the value of any outstanding debt.

[The Masked Tulip]

This is the great unknown for Joe Public and methinks in a meltdown Joe Public will be royally shafted.

If you spread your cash around to keep an STR fund under 35K you probably will end up putting it into risky banks. Problem is, if there is no FSA money to bail out, say, the likes of A&L or B&B then you could well lose your savings if they went bust.

On the other hand.

If you keep all your money, more than 35K, with someone safer, say a Lloyds or a Nationwide, and in a meltdown situation they went bust then I guess the Government, FSA and BOE will use the 35K limit to tell you it is your own fault and that you have lost everything.

In other words, I think the powers that be will screw the little man each and every time.

[cynic]

This is the great unknown for Joe Public and methinks in a meltdown Joe Public will be royally shafted.

If you spread your cash around to keep an STR fund under 35K you probably will end up putting it into risky banks. Problem is, if there is no FSA money to bail out, say, the likes of A&L or B&B then you could well lose your savings if they went bust.

On the other hand.

If you keep all your money, more than 35K, with someone safer, say a Lloyds or a Nationwide, and in a meltdown situation they went bust then I guess the Government, FSA and BOE will use the 35K limit to tell you it is your own fault and that you have lost everything.

In other words, I think the powers that be will screw the little man each and every time.

No escape then? This is looking bad. Seriously, no heresy intended, I'm wondering if the money shouldn't be spent on a house!

Shhhhhh!! Don't tell the property bulls!.....

[cynic]

No.

If he buys or owns property you can get a charge over the property. Fix the interest rate at libor +2%.

As for investing in whisky, you can buy perfectly nice Malt (declassified Glenmorangay) in Lidl for £15 a litre. Why would I pay £30 a litre for the branded stuff?

Fine wines is in a massive bubble too. Buy Latour 2000 as they're not making it anymore (said Twain). But they're making 2008 as we speak...

Lidls or anywhere to buy a dram of something cheap to get you pissed - coudln't agree more.

But years ago I joined the Scotch malt whiskey society.

http://www.smws.co.uk/

A 'collectors' dram.

[dances with sheeple]

The advice coming out of the City is to remove all savings from Banks, and repay all debts ASAP.

Maybe easier said than done, but its food for thought.

Remove all savings from banks and stop paying all debts, the banking system ends and we can all start again.

[dreamOn120k]

If you spread your cash around to keep an STR fund under 35K you probably will end up putting it into risky banks. Problem is, if there is no FSA money to bail out, say, the likes of A&L or B&B then you could well lose your savings if they went bust.

On the other hand.

If you keep all your money, more than 35K, with someone safer, say a Lloyds or a Nationwide, and in a meltdown situation they went bust then I guess the Government, FSA and BOE will use the 35K limit

I have said it already today, the Government won't let any retail customers loose deposits up to £35k. They will print money (or its modern electronic equivalent) rather than let the whole personal banking system collapse. A decade of rampant inflation and negative interest rates is preferable to a Britain operating a medieval barter economy.

In fact high inflation and negative interest rates would be a neat way to transfer wealth to the younger able bodied working generation.

[cartimandua51]

I read somethind different (if Ive interpreted the question correctly - If I haven't, just disregard this).

However, my understanding is that if you have a 100k mortgage and 35k savings, and the bank goes pop, your savings will be deducted from any outstanding debt. This, apparently, goes for any savings that are held within any organisation that is part of the same banking group.

Therefore, if you have savings, it should be placed in a savings account with a different bank that is NOT part of the same group as any loans / mortgages you have, otherwise it will just be deducted off against the value of any outstanding debt.

This certainly works with other bankruptcies - if, for example, you have put a deposit on a washing machine and the retailer goes bust, I believe the receiver can force you to pay up the balance, but you don't get a machine, you join the queue of unsecured creditors...!