Banks bar soldiers from best mortgages: How dare they rip off heroes?

Published 02nd Dec 2009

High Street banks and building societies are barring members of the Armed Forces from the best mortgage deals.

Some lenders are forcing service personnel stationed overseas on to loans that cost up to 2 percentage points more than their best deals. This can push up the cost of the mortgage by £99 a month on a £100,000 loan.

And they are adding on arrangement fees of thousands of pounds.

Overall, an Armed Forces borrower with a £100,000 mortgage could be left £4,881 worse off over the course of a two-year fixed rate deal.


Lt Colonel Charles Platt is stationed in Scotland with the Sixth Battalion, The Royal Regiment of Scotland. He has remortgaged four times in the past six years and has struggled to get the cheapest deals because banks and building societies are denying them to soldiers stationed away from their main home. This year, he moved from a Halifax deal to one with Abbey.

In 2003, he was based in Wiltshire, and bought a four-bedroom house near Warminster. Charles and his wife Lorna lived there for 15 months before his regiment was posted to Northern Ireland. After two years there, he has been posted in Scotland, Afghanistan and London. As a result, Charles, 42, who lives in Scotland with his wife and two children, Eva, three, and Edward, one (pictured above), was forced with the choice of leaving his home empty, selling up, or renting it out.
Like many soldiers who are homeowners, he chose the latter option.
Charles says: 'Every time I have had to find a new mortgage it has been a struggle to find the cheapest rate. All I'd ask of mortgage lenders is for them to treat our property as if it was our main home, not as if we were a professional landlord.
'On each occasion, I have been excluded from all but five or 10 per cent of the market, and this means added costs.'

Those in the Armed Forces face special circumstances because they are often posted around the country or overseas. If they want to stay on the housing ladder they must either keep buying and selling when they are moved, leave the house empty, or let out their main home.

But while lenders are happy to dole out loans when soldiers, sailors and airmen first buy, many take a different tack when they are posted and their mortgage deal ends.

Some insist that they move on to the standard variable rate or, worse, take an expensive buytolet loan as if they were a professional landlord.

Buy-to-let deals are typically 2 percentage points more expensive than ordinary mortgages.

Lenders such as Barclays, Northern Rock and Britannia are among those which deny the best rates to the Armed Forces in some circumstances.

Richard Morea, from broker London & Country, says: 'It seems grossly unfair that those who are serving their country, and are unfortunate enough not to have the freedom the rest of us have over where we work, should be penalised in this way.

'On their mortgage application they would have had to declare what their job is, and these lenders would have taken them on knowing full well the risks involved with that work. They approved the loan knowing that and should offer them the same terms when it comes to taking out a fresh deal.'

According to the Ministry of Defence, more than 13,000 servicemen are on military operations overseas. Tens of thousands more are stationed at barracks away from their home town.

Many are allowed to take their families with them to live in military accommodation.

When posted, these troops are often faced with the choice of leaving their property empty, selling up, or letting it.

Most opt to let it. This allows them to remain on the housing ladder and means they don't have to incur moving and mortgage fees. It is also preferred by insurers who consider empty properties to be a risk.

An investigation by Money Mail found that Britannia, Barclays and Northern Rock would bar these servicemen from taking out new, cheap home loans when their deal comes to an end.

Instead, they have to sit on standard variable rates which are normally higher then the cheapest deals. Or worse, they would be treated as landlords and made to take out more expensive buytolet mortgages.

These three would also force buyers on to buy-to-let rates if they were not planning on living in the house initially.

The best two-year fixed rate available at the moment for someone with a 30 per cent deposit is 3.78 per cent with a £995 fee.

But the best buy-to-let deals for those in the same position would be 5.5 per cent and they would have to pay a 3.5 per cent arrangement fee - equivalent to a whopping £3,500 on a £100,000 mortgage.

Yet Abbey, Alliance & Leicester, RBS, Halifax and HSBC would all allow Armed Forces members to take their pick of the best deals.

Nationwide BS has special exemptions so that Armed Forces members can buy then let out their home.

Barclays, too, has a specific policy, but it restricts borrowing, rather than making it more flexible. A spokesman for HSBC says: 'Our policy is all about flexibility and knowing your customers' personal circumstances.

'Essentially, someone who is in the Armed Forces and posted overseas has not had a change in their financial circumstances. It's not as if they need the rent to suddenly cover the mortgage. After all, they are not a professional landlord. It's almost as if they had a lodger. And our view is also that having someone stay in the house is better than having it vacant, when there are considerably more risks.'

Source: ' Daily Mail '

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