What happens when you pay for a house?
You’ve found a house, signed the papers and the money now needs to change hands. Your bank transfers the money you’ve borrowed to your solicitor who will then send it to the seller’s solicitor.
As you celebrate your new home, the possibly biggest payment of your life is being processed behind the scenes.
Imagine if the money is sent in the morning but because of a delay in the payment system it will arrive in the evening. At midday, you check the news and to your horror realise that your bank has gone bust.
This is where the Bank of England enters the picture. All of the major banks in the UK hold bank accounts with us to avoid any such situations. We call this service Real Time Gross Settlement (RTGS) because transactions can be settled instantly and finally. And as a central bank, we can’t go bust.
RTGS works in the same way as when you transfer money between two accounts in the same bank. The amount is simply deducted from one account and added to another. High-value transactions are processed in the RTGS service via a payment system called CHAPS. This is a risk-free, instant way of settling big payments such as when you buy a home.
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