My mortgage discount rate ends in Feb, having faced the fact that our money could have easily gone forever re-Icesav we are considering paying off the mortgage. Just an idea, but if an ofset mortgage is in place and the lender goes under, does this mean that the borrowers money is set against the debt. ie we wouldn't lose the money? if not can you see something of this kind hitting the market to ensure confidence for customers?

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 firm were to fail, FSCS would consider a depositor's overall net claim, which would include taking into account any amount owed which the firm may set off.

In the event that set off is applied, and if the borrowings exceeded the depositor's savings, there would be no overall claim against the failed firm, 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 may be applied by the Insolvency Practitioner dealing with the bank failure. As a result, the depositor may end up owing the bank £50,000, so there would be no positive balance and no claim for compensation.

mmmmm......... not such a good idea then. Is it better to have a savings account with no more than 50k and use the interest to reduce the mortgage debt or initially pay a lump sum? our situation is 100% endowment mortgage with a shortfall currently running at £15,000 with maturity 2014 so little time to make it up or change to repayment with little chance of any recovery or terminal bonus. WHAT TO DO! We have considerd selling our home but the housing markets not good and in the region of £350,000 not much hope of a buyer with the credit crunch. We were planning for retirement but we are at a loss as what to do and also lost trust with IFA let alone the banks!

You need to take the idea of benefitting from a bank going bust out of your calculations.

Normally savings will earn less interest that you pay on a mortgage so it's usually beneficial to pay a lump sum off the mortgage if the agreement lets you do that without penalty.

It can be very confusing nowadays. So many different different mortgages and having to rely on reccomendations by IFA comes with some mistrust. According to news reports people are having difficulty transfering being left with the higher interest payment. Hopefully things will have settled down a bit when its our turn. Does anyone no why some banks & BS dont do offset?