Offset and Savings accounts moneys - What if Banks fail or we get a run on the banks

Discussion in 'Property Market Economics' started by paulF, 17th Mar, 2020.

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  1. paulF

    paulF Well-Known Member

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    What are the disadvantages of keeping large sums of money in the bank wether in an offset or savings account (both covered by the 250K government guarantee) in case of a run on the banks or if a bank fails?

    I'm taking some cash out just in case but mainly leaving most of my offset account money in place as i do believe that this will pass ...

    Anyone considering topping off their mortgage with some of their offset money?
     
  2. Trainee

    Trainee Well-Known Member

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    what does that achieve in terms of fearing bank runs?
     
  3. Peter_Tersteeg

    Peter_Tersteeg Well-Known Member Business Member

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    Keep in mind that one of the key things that APRA has done back in about 2016 was to increase the banks cash reserves. I've got no way to measure the likely hood of a bank going under, but they're almost certainly in a stronger position than they were a few years ago.

    The lenders I'd be concerned about are the small finteck and neo-banks that have popped up in the last few years.
     
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  4. paulF

    paulF Well-Known Member

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    I don't trust politicians or the government with that guarantee so if i top off the mortgage with offset money, at least i will have a much smaller mortgage.
     
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  5. Trainee

    Trainee Well-Known Member

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    so your fear is that your bank account will be taken and your mortgage will stay the same?
     
  6. Silverson

    Silverson Well-Known Member

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    I’m just thinking out loud here but there may be a possibility they absorb the offset funds into the mortgage hence lowering their exposure?
    I.e if you had a mortgage of 400k and 370k in offset they may absorb 120k leaving you with 250 in offset and 280 mortgage? Again just having a wild stab in the dark.
     
  7. Peter_Tersteeg

    Peter_Tersteeg Well-Known Member Business Member

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    I believe there is legislation in place allowing lenders to do this.
     
  8. wylie

    wylie Moderator Staff Member

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    We have prepaid our loans forward, with enough repayments sitting in each loan to take us through to February 2021. We did this to cover repayments through our build.

    So each month, the repayment is swept from "available" and I'm not making manual deposits into the loan account as I usually do (no automatic transfers set up).

    If the bank did take those funds and move them from "available" and pay down the loan with those funds, I'd assume they would also have to cancel the redraw ability on the loans or reduce the limits of each loan, and if they did that, I'd ask that they reduce our monthly repayment to suit the new loan limit.

    It wouldn't bother me either way, as we don't plan on redrawing from these loans.
     
  9. Lindsay_W

    Lindsay_W Well-Known Member

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    Cash is worthless when doomsday comes, buy gold instead
     
  10. wylie

    wylie Moderator Staff Member

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    I'm preparing for a huge shake up in life as we know it, short to medium term. If we end up in a "doomsday" situation, then I doubt gold will help much either.
     
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  11. Peter_Tersteeg

    Peter_Tersteeg Well-Known Member Business Member

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    When doomsday comes, enjoy your gold. Personally I think high velocity projectiles and their delivery systems will be far more valuable. Even toilet paper isn't as useful.

    Fortunately I don't think that doomsday is going to be the result of all this.
     
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  12. Silverson

    Silverson Well-Known Member

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    What steps are you talking? The folk down in melb have a doomsday portfolio of toilet paper and tissues
     
  13. Harris

    Harris Well-Known Member

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    Gold is down and is at Dec 19 levels along with the gold futures - gold hoarders are selling metal en-masse to secure as much cash as they can get their hands on and more supply currently than demand..

    I expected my build projects to stop midstream so have put vast majority of my cash funds now into a Depository account with Perth Mint.. which in my opinion is the safest option as 100% of cash/ precious metals bought through them is backed by WA's gov sovereign guarantee. Ironically, I bank with WBC and Perth Mint has a WBC account too where my cash has gone!

    I think your $250k is safe with the deposit guarantees - its excess cash which was getting a bit worrisome for me.
     
  14. wylie

    wylie Moderator Staff Member

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    We've not made any changes until just this weekend gone. I've stocked up on grocery items to allow us to stay close to home for two weeks if that is forced on us. I've bought some long life milk and more tinned goods than we would normally have in our pantry, but we are not going overboard.

    I'll still pop out for fresh fruit and vegetables but will be much more aware of staying away from people as much as I can.

    And I'm not a "prepper" or even a "panic merchant". But I do have a husband who has no spleen so he is extremely vulnerable and cannot fight infection like most people can. And if I get infected, I'll pass it to him. A cut on his leg put him into hospital for two nights including Christmas night in 2018. Hospitals don't keep people in Christmas night if they can send them home. We just can't take chances.

    Even his specialist wants him to have a phone consultation rather than visit the hospital in a few weeks.

    So I've put a stop to him taking his (nearly) 91 year old mother shopping for the next few weeks. I'll organise to shop for her, but my preference is that I'll organise home delivery for a few weeks. She won't like that but I believe she is being quite selfish expecting him to do this whilst this is unfolding. She needs to stay around home herself, but she is out every day. So I'm stepping in.
     
  15. Trainee

    Trainee Well-Known Member

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    Realistically the only way to lower bank run risk is either use the biggest bank thats available, keep the cash in a safer currency, or keep it as something else (metal, etc)

    you cant have use of the banking system and expect it to collapse.
     
  16. wylie

    wylie Moderator Staff Member

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    I don't think anyone is "expecting" it to collapse. But these times are tricky so it's good to be a bit prepared, think about "what if?".
     
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  17. Trainee

    Trainee Well-Known Member

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    Point is, you cant properly prepare unless you dont use the system.
     
  18. paulF

    paulF Well-Known Member

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    Yup, but i guess that is a mute point if the banks can already absorb part of your offset money into the mortgage anyway as Perter mentioned above.
     
  19. Morgs

    Morgs Well-Known Member Business Member

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    Agreed
     
  20. Lindsay_W

    Lindsay_W Well-Known Member

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    Aint that the truth ! I'm going back into my bunker now