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Security of an offset account if bank goes under

Discussion in 'Property Finance' started by db9, 31st Jul, 2016.

  1. db9

    db9 New Member

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    Hi everyone,

    I see and hear a lot of investors saying it doesn't matter if your loan is with the big 4 or a small non bank lender.

    With regard to interest only loans coupled with a sizeable offset account, if the bank went under (bankrupt), what would happen to the money in the offset account?

    I hope that makes sense.

    Kind Regards,
    db9
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    The money would be lost - but there is a federal goverment guarantee for deposits of up to $250,000
     
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  3. db9

    db9 New Member

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    Thanks for the quick reply! Does this guarantee apply to all financial institutions? I was under the impression this only applied to the big 4 banks.
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    No it doesn't apply to all, but it applies to many more than just the 4 big banks. There is a thread on here somewhere with some research that I did.
     
  5. db9

    db9 New Member

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    Awesome! Thanks I'll search for that. Thanks for the help Terry_w
     
  6. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Safer than a redraw on a mortgages or loc I suspect

    Ta
    Rolf
     
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  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Redraws would probably be cancelled when the debt is sold. Similar with unused LOC amounts.

    At least with an offset account you could quickly withdraw the cash if need be - without tax consequences too.
     
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  8. Redom

    Redom Mortgage Broker Business Member

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    Equivalent of a bank run!

    The federal government will likely step in and do what they can to protect it (it would be massive financial chaos if people thought their cash was at risk in offset/transaction accounts).

    There'd also likely be a little bit of notice beforehand - your not going to wake up tomorrow in a state of economic and financial chaos, there'll be forewarnings of major risks beforehand.

    There is a government guarantee of $250k deposit per bank too, to protect against bank runs.

    Out of interest, there's a tale where one bank manager who feared a bank run during a major economic crisis stocked his front window with gold bars. It gave the illusion to people that the bank was more than safe (and apparently it worked!).
     
    Last edited: 31st Jul, 2016
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