Virgin Money has become the latest lender to join the Ministry of Defence (MoD) scheme to help armed forces personnel onto the property ladder. But some brokers object to the scheme’s piecemeal adoption and say the programme should become standard policy for all major lenders.
The Forces Help to Buy scheme allows military staff to borrow up to half of their gross annual salary interest free (up to a maximum of £25,000) in order to either buy their first home, move to another one or, says the MoD, “in exceptional circumstances” extend an existing property.
The scheme also covers some homebuying costs, such as solicitor fees.
For soldiers coming back into civilian life who are not sure what to do next, having a home is a key step. It can cut the suicide rate among former military personnel
In March, Virgin Money said it would accept Forces Help to Buy loans as a mort-gage deposit, with the amount repaid by deducting equal instalments from the salary of the borrower over 10 years, as is commonly the case with these deals.
At the time, Elite Force Mortgages founder Simone Riley said the move was “very welcome”, adding: “As an RAF family mortgage broker, I am thrilled that [Virgin Money has] started accepting this source of deposit, with a clear, straightforward policy.”
According to the MoD: “The aim of this scheme is to address the low rate of homeownership within the armed forces.”
It adds it recognises “the positive impact owning a home can have during an inherently mobile career”.
The programme allows military staff to choose somewhere they want to settle down in before they leave
But Patrick Glennon, founder of mortgage broker firm Patrick James Solutions, says the armed forces should have “much more widespread access to lenders on these terms”.
Virgin Money joined a number of mainstream lenders, such as Barclays, Halifax and NatWest, as well as specialists including Kensington, Precise Mortgages and Together, in running this programme.
But several major lenders do not offer such loans, including HSBC, Leeds Building Society and Santander, according to Knowledge Bank data at the end of April.
Glennon has a deep understanding of this market for armed forces personnel, having served in the Royal Signals for five years before leaving as a lance corporal in 2013 to set up his own mort-gage brokerage.
He had previously worked in the mortgage industry for six years prior to joining the army at the age of 25.
Even if you want to build a military career, you can buy a house and rent it out while you move around on tours
“I was fearful that, when I looked back, all I would be able to talk about was financial services,” says Glennon. “I felt like a change.”
His time in the army included two tours of Afghanistan, totalling 10 months, where he maintained radio-blocking devices that jammed roadside bombs.
Around 40% of his business comes from armed forces personnel. This means he spends time talking to servicemen and -women at military bases — such as Blandford, Catterick and RAF Cosford — about mortgage planning.
Glennon says: “When soldiers are back from a tour, all they want to do is spend time with their family or go on holiday. Rightly so. In the precious time they give to me, they want to hear about their options in simple, clear language.”
Glennon adds that, over the past two decades, the armed forces have seen a jump in homeownership, encouraged by the MoD, which wants to see staff transition more smoothly out of the services.
The MoD recognises the positive impact owning a home can have during an inherently mobile career
He estimates that, 20 years ago, only 25% of armed forces personnel were homeowners; it was easy to spend one’s entire career living in single or married quarters, in low-rent MoD accommodation.
But now around half of service staff own a property, in preparation for the day they leave the service.
An unnamed male Royal Marine, who took part in an MoD survey about the Forces Help to Buy scheme last December, said: “It enabled me to get on the market as I wanted to move into our house and out of married quarters.
“It was £25,000 towards the deposit, which hugely changes the size of the property and the affordability of the property.”
Glennon points out: “The programme allows military staff to choose somewhere they want to settle down in before they leave.
“And, even if you want to build a career, you can buy a house and rent it out while you move around on tours.”
As an RAF family mortgage broker, I am thrilled that [Virgin Money has] started accepting this source of deposit
Glennon says his transition back to civilian life went smoothly because of his previous experience — before joining the army — working in the mortgage business.
From 2002–08 he worked first at Northern Rock, then City Financial and finally Money Gate.
After life in the army, coming back to financial services was a natural step.
He says: “I was lucky but, for soldiers coming back into civilian life who are not sure what to do next, having a home is a key step.
“This means they avoid the rent trap, or homelessness, and owning a home can cut the suicide rate among former soldiers who find it hard to transition.”
The MoD launched the Forces Help to Buy programme in April 2014. However, it was set up with a shelf life and was regularly extended until it became a long-term policy in January this year.
The scheme enabled me to get on the market as I wanted to move into our house and out of married quarters
By last March, the scheme had made 27,079 payments to the UK’s regular armed forces, which comprise 146,270 staff, excluding reservists, Gurkhas and other personnel, according to the MoD.
The plan replaced the ministry’s Long Service Advance of Pay scheme, which had a maximum borrowing allowance of £8,500.
Glennon adds: “I think all major lenders should get behind this scheme, for the people who have given so much to the country.”
