Brokers have hit out at Treasury and EU rules that prevent armed forces personnel from taking up the Help to Buy mortgage guarantee if they have used the Forces Help to Buy scheme to raise their deposit.
Previously branded as the Long Services Advance of Pay scheme, the Forces Help to Buy scheme allows armed forces personnel to borrow up to 50 per cent of their salary – to a maximum of £25,000 – to use as a deposit to buy a home.
However, the Treasury says EU state aid rules prevent people who have taken advantage of Forces Help to Buy from accessing the Help to Buy mortgage guarantee scheme.
A Treasury spokesman says: “The Government is committed to supporting service personnel in to home ownership. The Help to Buy mortgage guarantee scheme is open to members of the armed forces [though not those who have accessed Forces Help to Buy] and has been amended to ensure service personnel are not disadvantaged due to the nature of their profession.”
State aid rules say it is not possible to combine the support from the mortgage guarantee scheme with another publicly assisted loan such as Forces Help to Buy. But the Treasury says Forces Help to Buy can be used with the Help to Buy equity loan scheme as this is viewed as a financial transaction as opposed to being a mortgage product where a lender must purchase a guarantee.
Brokers argue the Treasury and the EU should reassess whether these rules should be extended to armed forces personnel.
David Hollingworth, associate director of communications at London & Country, says: “This is something the Treasury and EU should address because it takes away from the usefulness of Forces Help to Buy if the personnel using the scheme cannot then benefit from the best offers in the wider mortgage market.”
But he says even if state aid rules were overturned, lenders could still prevent members of the armed for-ces from using Help to Buy if it allows them to access 100 per cent loans.
“It may be that by borrowing to build a deposit, and then using the Help to Buy scheme as well, some lenders take the view that this is too much debt to assume and therefore affordability is affected.
“The point holds up if the Forces Help to Buy scheme has been used to fund the entire deposit. But if someone has borrowed against their salary and also used savings to put together a deposit, I don’t see why they should not have access to the Help to Buy mortgage guarantee.”
Stuart Gregory, managing director of Lentune Mortgage Consultancy, says lenders and policymakers have failed to communicate the rules around Help to Buy and Forces Help to Buy to brokers.
“I am not sure a lot of brokers are even aware that using the scheme immediately takes the Help to Buy mortgage guarantee off the table because of state aid rules,” he says.
“These points need to be clarified because you then get into situations where people are wasting time on applications that will never go through.
“If the scheme exists to help inc-rease the level of home ownership among armed forces, they should have access to the full range of products available. State aid rules are one thing but armed forces are out on service for us at home and should perhaps be treated in a different light.”
David Whittaker, managing director of Mortgages for Business and a former senior British Army officer, says armed forces personnel have long been disadvantaged by lender policies, such as being rejected for having a British Forces Postal Office address.
He says: “This appears to be another example of how the lending community does not treat the armed forces equally. If a young sergeant based in Germany wants to purchase his first property in Britain and lists a British Forces Postal Office address, he could be rejected.
“These are set up so members of the forces can communicate with their families without having to pay overseas fees and that is a hugely important thing to have. To disadvantage armed forces personnel, who are going overseas in the name of our country, is reprehensible. We need to assess this.”
Gregory adds: “It is sad that armed forces have historically been put at a disadvantage by a lot of lenders. Another example is Nationwide, which no longer accept forces applications through brokers, and this puts services personnel at a disadvantage.”
At a glance: Forces Help to Buy
- Allows armed forces personnel to borrow up to 50 per cent of their salary
- Available to a maximum of £25,000
- Loan is interest-free
- Cannot be used in conjunction with Help to Buy mortgage guarantee
- Can be used to obtain a Help to Buy equity loan