9:25 AM, 15th April 2013, About 9 years ago 42
Around 1 million Woolwich and Barclays Offset customers are to be affected by the changes to their offset reserve accounts.
I am looking into the detail of this as it might well affect landlords who are using these accounts in the belief that they are a “safe haven” for their liquidity reserves.
Many of these mortgages are linked to pre-credit crunch low rates of interest. Nevertheless, given that money invested into offset reserve accounts tied to mortgages, some borrowers believe that it makes sense to utilise the facility to reduce their mortgage interest as opposed withdrawing the full facility and investing the cash elsewhere.
My concern is that landlords might find themselves high and dry when they come to access this cheap money as a deposit on another property or for essential repairs and maintenance of their property portfolio’s. This may put landlords into ‘dire straights’ if they need the money quickly as the only way forward might involve refinancing. You can also be pretty sure that any remortgage will be more expensive too. It’s not just the interest rate you need to worry about if you remortgage though, there will also be costs, and that’s assuming you can even get a remortgage in this difficult market!
Obviously the proposed changes make sense to the bank. Whether you have used the available credit or not the bank still has to treat the debt as committed and hold funds on reserve. If you are not borrowing they are not making money. They can also lend new money out at far higher rates than they might earn if you draw the full balance of your pre-credit crunch facilities.
If I had one of these accounts now I would be withdrawing the maximum possible amount of funds and depositing it with other banks which are not connected to the Barclays Group before it is too late.
Remember, if your cash reserves are greater than £85,000 it is advisable to deposit your funds with multiple banks in order to benefit from the £85,000 guarantees on your money if the banks were to collapse.
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