Are my Santander savings safe?

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The news that Santander has had its credit rating slashed by credit agency Moody's will alarm many British savers. With good reason - Santander has around 25m UK customers.

In Spain, some depositors have already started withdrawing their Santander savings. So, how worried should you be?



Rush to the ATM?

First, let's separate Santander UK from its Spanish owner. Santander UK remains an autonomous operation with the vast majority of its assets - 90% - being UK based. It's also highly unlikely the UK operation would be expected to support the parent operation back in Spain.

UK savers themselves are wrapped in plenty of insulation thanks to the Financial Services Compensation Scheme (FSCS). Cash deposits of up to £85,000 per person per financial operation are guaranteed by the Government. Beyond that (substantial) limit though there is no further protection for your cash savings.

£85,000 guaranteed

Bear in mind that if you have cash across Santander's subsidiaries such as Cahoot, the £85,000 cover is guaranteed per institution rather than per subsidiary. If you're deeply embedded across Santander Group's product operation, some may feel more comfortable with a bit of re-trenching. But there would be no logical reason to do this, given Santander UK's solid base.

"The essential point to note is that the change to Moody's credit rating of Santander UK plc has no impact on our businesses in the UK or our plans for future growth," said Santander in an emailed statement to AOL Money. "There is no issue for customers. Santander UK plc is an autonomous subsidiary of the Santander Group...and [has] a Eurozone sovereign exposure of less than 1% of assets."

Mortgage rate hike?

It's also highly unlikely the FSA would allow Santander to support its parent arm, even if Santander Spain wanted it to. Whether the Santander downgrade will significantly affect its borrowing costs - for example, if you're looking for a mortgage or are stuck on a Santander SVR - remains to be seen. But costs are not likely to rise by much currently. Longer term, this may be more of an issue.

"No panic stations at the moment," says David Hollingworth from London & Country Mortgage brokers. "Santander UK is strong. But if the worse did happen, you mortgage would continue. In terms of pressure of lending costs, all lenders are dealing with rising funding costs and a number have moved [up] their SVRs."

Currently Santander's SVR is 4.24%. "But there are no guarantees, ad infinutum," Hollingworth adds. "A Standard Variable Rate is just that, variable. 4.24% is not very high but you could be doing better by switching."

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