I have a mortgage account and a separate (yet linked) savings account with a certain Australian bank.
This bank draws a minimum mortgage repayment from the savings account into the mortgage account every month. However, it also permits me to freely transfer extra money in and out of the mortgage account, the balance of which offsets the interest charged.
Given the low cash rate, my savings seem to be working a lot harder by sitting in the mortgage account to offset the interest, as opposed to sitting in the savings account earning interest which is otherwise taxable.
My question: Is it safe to keep all my savings in such a mortgage account?
My concern is that, for whatever reason, could the bank suddenly deny access to my savings from the mortgage account (i.e., the funds on top of the minimum repayment balance), if they changed their policies or suffered some problem, like going into administration?
Perhaps this is a naïve/paranoid question, but I haven't found anything in the bank's terms, our contracts or in the product descriptions that say this couldn't happen...
After a few discussions and the comments I've received so far, I gather that:
- Keeping all my savings in one place is risky regardless of where they are kept, so it's perhaps best to keep at least a few thousand in a separate account for emergencies (thanks @MrChrister)
- The worst that could happen does appear that, in the case I am denied access to my savings kept directly in the mortgage account, is a 'short-term liquidity crisis', which I can mitigate with the above strategy (thanks @fennec).
- Using an offset account linked to the mortgage account for the emergency funds (and not the bulk of savings which is otherwise kept directly against the mortgage) which reduces the mortgage interest may be worth it if the savings in interest reductions are greater than the account cost (thanks @Victor).