Is Your Staff Rate Mortgage Benefiting You?

As some companies look to withdraw their ‘staff rate’ mortgage benefit, we look at how the once-popular offer may not be in the best interests of employees.

What is a Staff Rate Mortgage?

Also known as ‘concessionary staff mortgage schemes’, they have been a highly prized feature of employment in the banking sector for many years.

A staff rate mortgage is something that a permanent employee can obtain at a variable rate. 

i.e. Employees would pay 1.5% above the Bank of England’s base interest rate, compared to a 2% that would be available to retail customers.

Usually, a lower rate than offered by high street lenders, it is at the discretion of the institution as to what percentage they provide to staff. 

Employees and additional applicants still go through the same affordability checks to ensure that the lending is affordable and staff can manage the rate.

What are the advantages of a Staff Rate Mortgage? 

A low-interest rate can have a significantly reduce the total amount you pay for your property. The low-interest-rate also reduces the monthly payments you will need to pay for your mortgage.

As will all work benefits, everything is geared around simple implementation, so the staff rate mortgage, alongside targetted marketing to employees is a very accessible mortgage product.

As the mortgage rates offered are usually more attractive than Barclays, Halifax, HSBC, Lloyds and Santander retail products, employees feel they are being looked after by their employer, with an exclusive offer.

As with all employer benefits, is great for retaining staff and building brand loyalty.

What are the disadvantages of a Staff Rate Mortgage?

Receiving a preferential mortgage rate is appealing. However, it does come with a few complications. 

Some employees are not comfortable tying their mortgage with their employer. They feel their home could be at risk should the relationship with their employer break down. 

A Staff Rate Mortgage is also an employee benefit and as a result, is viewed as a ‘Benefit in Kind‘ by HMRC. 

This means that the savings that you make from using such a scheme are subject to tax based on the HMRC’s ‘acceptable mortgage rate’.

You deduct the rate you will pay, from the HMRC rate and the difference is the rate at which the benefit in kind is calculated.

This could result in a change in your tax code or as many of the team at trufe. have experienced, with such low-interest rates available off the high street that don’t incur additional tax liabilities, the staff rate mortgage may not be the most appropriate mortgage solution.  

Why are Staff Rate Mortgages Coming to an End?

As it stands, staff rate mortgages are coming to an end in the banking sector, and while interest rates on the high street are so low, there’s not much of an added benefit to having a staff rate mortgage.

The competition from online mortgage lenders and the ease of comparing deals have added pressure to the mortgage market, and as a result, traditional banks are having to respond. 

To do this, they need to reduce costs, improve efficiencies and unfortunately, staff perks are often the first to fall.

What would be the benefit of using a Mortgage Broker Instead?

Mortgage brokers are independent of an employer so are not restricted by one specific lender’s rules.

At trufe. we search the mortgage market, entering your specific details to find the right lender that suits your individual circumstances. 

We clearly outline the mortgage products that are available to you and the benefits and disadvantages of each. 

Our team then ensure you are then able to make an informed comparison that is not confused by introductory offers and misleading rates or that impact on your tax liabilities.

If your mortgage offer is coming to an end or you are looking to move house, please contact us for a free no obligation chat about your situation whether you are looking to switch mortgage lenders, remortgage or move home.

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