Defence Secretary Michael Fallon and the British Bankers’ Association (BBA) announced the deal this week, allowing soldiers to avoid the higher costs of a buy-to-let mortgage.
The commitment from the UK’s biggest high street banks will benefit almost 265,000 people in the UK and abroad, including forces families.
Barclays has been offering these deals for some time and HSBC, Lloyds Banking Group, Santander UK, Royal Bank of Scotland and Nationwide will also now all offer this arrangement.
Barclays’ deal is offered exclusively to serving personnel on a permission-to-let basis for a set period. The lender will also agree a property purchase on a residential mortgage when the intention is to let the property from day one.
Without this policy, a customer might have to pay additional fees including a product fee and would face an increase in the interest they pay on their mortgage under buy-to-let representing an increase of over £100 per month for a typical mortgage, said Barclays.
This week’s Armed Forces Covenant Financial Services roundtable was attended by major banks, building societies, Experian and credit reference agencies, CBI, IoD, FSB and sector trade bodies.
The meeting discussed the issues financial services companies have including recognising and accepting overseas postcodes, disputed credit histories following frequent changes of address and lost insurance benefits like no claims discounts.
Defence Secretary Michael Fallon said: “Looking after your home and your money can be more of a challenge when deployed on operations or serving abroad. This is a welcome first step from the major banks and financial institutions to help our servicemen and women get a better mortgage deal. I look forward to further pledges from across the financial services sector to support the Armed Forces Covenant after today’s roundtable.”
Anthony Browne BBA CEO said: “Members of our Armed Forces work all over the world to look after us, so it’s only right that we look after them. The extra support proposed by the banks and the Ministry of Defence will make sure service personnel and their families are not disadvantaged for working aboard and make their mortgages and credit history fairer.”
Of the nearly 800 business signatories of the Armed Forces Covenant, which seeks to make sure armed forces are treated fairly, 29 are from the financial services sector.
Ashok Vaswani, CEO, personal and corporate banking, Barclays said: “We recognise the personal sacrifice made by our armed forces, so it’s right that our mortgage policy ensures they are not penalised.”
Sara Baade, chief executive of the Army Families Federation, said: “What this recognises is that military families often have limited choice in where they are sent to live. They go overseas because the country needs them to. It will mean a lot to those that have bought their own homes to know that the challenges of service life are beginning to be understood by our banks.”