Yes current thinking is it may well be. In fact, this isn't just the case for offset mortgages. In the case of any mortgage, it is likely that any savings with the same institution would be netted off regardless of whether they are in such an account and regardless of whether they are more than £50k. In one sense, it is a great form of depositor protection, giving you far more than the £50k limit. In the more realistic sense, it is a pain and you might not actually want to repay so much of your mortgage in one go!
If you want to retain your savings, then put less than £50k in each place and consider not having them in the same place as your mortgage.
This is simply what people currently think. We need a bank to fail before we really know what will happen in practice and we're all hoping that won't happen.
mr tom.