Should I deposit with mortgage provider?

Hi all, I am feeling very paranoid at the moment and honestly believe that the Irish government could potentially go bust at some stage in the near future. On that basis I have a few questions as follows:

(a) If the government did go bust, I presume that it can no longer guarantee savings in any of the country's banks. If the IMF or ECB were called in to help, would these savings be guaranteed by them or would depositors lose everything they have invested?

(b) I will have about EUR50k available to me come the end of December and I was originally planning to put it on deposit with An Post into savings certificates. However, I have since been getting a terrible feeling that the government could go bust and I am wondering if it would pay to put the money on deposit with my mortgage lender, Permanent TSB, at least for a year or so until things "settle down". My logic is that, if the government were to go bust, then the money I have on deposit with the mortgage provider would be deducted from the mortgage remaining, meaning I would not be losing out completely if the worst happened. Maybe someone could clarify for me whether depositing with the mortgage provider would be treated this way if the worst did happen, God forbid.

thank you all for your time.

Hi Japester, I too have kept some money on deposit in a savings account offered by my lender, but I don't know if there's anything in the legislation or rules to offset one amount against the other should the worst happen. I would hope that it would come into play though.

(A) Nobody knows for certain. I would guess that the ECB would not let people loose their savings in that situation.

Irish government credit default swaps suggest about a 1.4% chance of a default by the Irish government inside the next 5 years.

(B) When a Dutch bank recently collapsed, liabilities and assets were netted.

If you are so worried about Irish banks, why not save with a non-Irish bank?

Or simply pay the money off your mortgage?

That way you are taking no risk.

"Or simply pay the money off your mortgage?"

Brendan, is that your view of what we should be doing with our savings right now?

There seems to be more advice on AAM suggesting that it could be a waste to pay down on the mortgage when rates are so low.

Thanks very much to you all for your opinions and advice. I know what Brendan is saying alright but the mortgage is costing around EUR700 at the moment per month (variable rate) and is over 15 years total (just under 14 remaining). I understand that interest rates are likely to rise next year probably but at the moment it would seem to be madness to pay off the mortgage as the deposit rate is much more attractive, except of course for the "piece of mind" factor which is worth a few percentage points in its own right! I'll probably wait at this stage to see how the budget pans out. I think that if the government shows signs of getting its house in order, then the chances of defaulting will be much slimmer and it was very good to hear about the odds of a default being so low over the next 5 years, so thanks also for that info.

Does anyone know what happened in Iceland to the savings of depositors when the IMF came in? Did they lose the lot?

Jetblue said:

"Or simply pay the money off your mortgage?"

Brendan, is that your view of what we should be doing with our savings right now?

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No. But the OP seems very worried. "Hi all, I am feeling very paranoid at the moment and honestly believe that the Irish government could potentially go bust " So it's worth considering for him.

The safest, best rate available is Northern Rock which pays 3% gross, or 2.25% after DIRT. If you are paying less than this on your mortgage, then put the money in Northern Rock.

Does anyone know what happened in Iceland to the savings of depositors when the IMF came in? Did they lose the lot?

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That may be interesting, but it is irrelevant. The relevant question is what happens in Ireland. I don't believe that a right of set-off exists, but I don't know.

Try to get the answer from the Financial Regulator.

Brendan