Flaw in compensation scheme highlighted says National Homebuyers
A major flaw in the Financial Services Compensation Scheme (FSCS) has been highlighted and it could leave many people in financial difficulties.
[UKPRwire, Wed Feb 27 2008] Moneysupermarket has highlighted the fact that people who hold a mortgage and a savings account with the same bank will end up losing out should the bank go out of business.
The FSCS is designed to provide compensation to people who lose money as a result of this kind circumstance.
However, if the person receiving the compensation has savings and a mortgage, the FSCS money will go towards reducing the mortgage, leaving the customer without any savings and potentially leading to financial difficulties.
"Take the case of someone with £35,000 saved and a £100,000 mortgage. Rather than be compensated by the FSCS with £35,000 to be invested elsewhere, you will find your mortgage reduced to £65,000 and have no savings – potentially leading to financial hardship over the ensuing months," explained Kevin Mountford from Moneysupermarket.
"Until the FSCS changes this rule, the message is clear – don't have your mortgage and savings with the same provider, irrespective of whether you only have a couple of grand squirreled away or the top limit of £35,000," he added.
Fast property sale expert Julian King adds, "Homeowners are having a difficult time, as property prices are predicted to continue to fall.
"Although we do not believe that the falls will be sustained for a lengthy period, this does not reassure people who need a quick sale of their property now.
"Homeowners concerned about falling property values should consider a fast property sale away from the open market [estate agency] marketing approach".
Mr King is a director of National Homebuyers, the UK's leading fast property purchase company, guaranteeing a quick sale for vendors who need to sell property fast.