Home Ownership (Armed Forces)

John Glen Excerpts

Wednesday 29th June 2011 Commons Chamber

[John Glen (Salisbury) (Con)]

I welcome the opportunity to bring this important matter to the Floor of the House. It is a vital matter for serving armed forces personnel, and I speak today as someone who wants to make some constructive suggestions to the Minister in order to improve the uptake of mortgages. I do not think that that will mean new financial commitments from or undertakings by the Government, but I hope that it will deliver meaningful savings, if implemented well. I am particularly grateful for the support of my hon. Friend the Member for Beckenham (Bob Stewart) and the hon. Members for St Austell and Newquay (Stephen Gilbert) and for Ellesmere Port and Neston (Andrew Miller), who will contribute later.

Before I focus on access to mortgages, I pay tribute to Heropreneurs, a new charity founded by Richard Morris with the relatively simple aim of providing those who leave the armed forces with an entire business package, including start-up capital via a debt-for-equity model, pro bono legal and financial advice, a dedicated mentor, access to second-stage funding and a support network of people who have already made that journey from military to civilian life.

One beneficiary of Heropreneurs is Nick Cowan, a former colour sergeant with 23 years’ service in the Royal Green Jackets, who has set up a not-for-profit company called Mortgage for Life, which enables those in the armed forces to buy accommodation at significantly reduced cost via special deals that it sets up with developers, banks and building societies. Mr Cowan has met various hon. Members, including the Minister for the Armed Forces and the leadership of the Council of Mortgage Lenders.

In discussions with Heropreneurs and Nick Cowan, however, it has become clear that there are specific issues with enabling service personnel to get on the housing ladder prior to their exit point, so I want to focus on that and on how the Ministry of Defence and the Department for Communities and Local Government can enable more serving armed forces personnel to overcome the particular inhibitors of their employment status in order to access the housing market in the same way as their civilian peers.

Despite the investment of Governments before and after the general election, the National Audit Office has found that the MOD did not have sufficient accommodation overall to meet current demand; that, if it did, the properties were in the wrong location; and that many did not match the need among those families in the right places. The NAO estimates that it will take two decades to sort that out, so the MOD is spending £38 million on maintaining vacant properties and paying out £16 million annually on private rented accommodation.

One way to resolve those issues and high costs is to make home ownership a more accessible alternative option. It is potentially a cost-saving alternative to private rentals, and the MOD is responding. Giving the military covenant statutory force means that we have some confidence in the seriousness with which it takes a range of issues, and the Minister for Housing and Local Government, who is in his place, has also made encouraging announcements in the past week.

Housing agents will be dispatched to barracks throughout the country and abroad to help troops apply to buy a home under the £500 million Firstbuy scheme, which aims to help more than 10,000 households purchase a new build home over the next two years. There are some questions about that, however. Who are the agents? Will they be paid? Will they be on commission? How often will they visit personnel? And, what qualifications do they have?

The first indications from those who have been observing this matter are that, in the Firstbuy paperwork, priority for housing will be given to existing social tenants and MOD personnel, so service personnel will not receive quite the priority that was suggested in the announcement by the Minister a week ago. Though that was welcome, it is still the case that there is very little social housing in this country and most property is owned by housing associations. If we want to tackle this problem in its entirety, we have to unlock the issue of housing associations having the autonomy to decide what to do with properties. The challenge is to make them open up the categories of person to whom they let property. An ongoing concern is that service personnel no longer receive a discount towards purchasing their social housing or housing association property. In the past, time served in service families accommodation would count towards the discount when buying their council house. The removal of that rule offers some challenges.

The challenges remain significant. As a member of the Select Committee on Defence, I am clear that thousands of personnel will leave the services in the next six months and, while specific initiatives will assist in the short term, we need to do more to change the lending culture towards the armed forces. The Council of Mortgage Lenders has confirmed that the industry supports measures to help overcome barriers to home ownership for military personnel. The mortgage application process will be refined and lenders will accept the principle that serving men and women should not be disadvantaged, but the details are important. It is critical that this is put right.

I understand that we will shortly get to the point where lenders’ systems do not reject applications because they come from British Forces Post Office addresses, so we should be in a situation where prospective lenders take applications from military staff out of their automated response processes, where appropriate. It is astonishing that there are these barriers to service personnel that mean that they cannot get beyond the application stage.

I understand that that industry is producing top tips for prospective borrowers from the services to assist them with key elements of the mortgage application process, and that is welcome. However, it is critical that the Minister ensures that this recently announced initiative is embedded in the mindset of the MOD. We cannot have the MOD saying, “Well, we’ve been doing it this way for some time and we don’t need your assistance, thank you.” We need a cross-departmental approach to ensure that the best outcomes are secured for these people who do so much for their country. There are real barriers that materially disadvantage service or ex-service personnel in securing a mortgage—in short, they cannot get credit-scored simply because of their profession.

I shall set out some of the key issues for consideration. Heropreneurs and Nick Cowan have written a mortgage manifesto, which addresseses how staff in retail branch networks handle mortgage applications and how they should have clear and consistent guidelines on how to treat certain savings products. Armed forces personnel should have access to the best possible discounts and fixed and tracker products, in line with those that civilian members of the public can access. Lenders should no longer be able to charge serving armed forces personnel more for life assurance premiums in relation to policies that are required to support a successful mortgage application than they do civilians of the same age. The Council of Mortgage Lenders, the British Bankers Association and their respective members should have a dedicated armed forces and veterans page on their retailing banking websites to give specific financial advice to those clients.

Strong consideration needs to be given to providing better-quality advice within the armed services themselves. It is critical that, embedded within training at different stages, serving personnel can get advice and access to independent financial advisers. I am not saying that the Minister or the MOD should become IFAs, but they should facilitate wise advice. If investment decisions are made when people are in their 20s they tend to determine how people will fare in their 40s and 50s, and they will have an impact on the generation that comes after them.

All serving armed forces personnel should have the opportunity on at least an annual basis to receive specialist advice. The issues relating to the use of long service advance of pay should be simplified as a matter of urgency, so that there is a clear presumption in favour of the money being used to put down a deposit or pay for the legal fees associated with a mortgage application. At the moment, that seems very difficult to deal with. The resistance to allowing people to secure a buy-to-let property also inhibits take-up.

Let me finish by acknowledging that the Minister has taken a lead in addressing some of the issues. I am here to urge him to go further, to work with his MOD colleagues and all Ministers across Government to ensure that our armed services personnel get the best that they deserve. The core concerns underlying this debate are beginning to be addressed. The matter has such serious implications for the financial well-being of our servicemen that we need to look broadly and deeply into this issue and at every aspect of it to ensure that we achieve what rhetoric and headlines would have us believe will be the outcome.