Pictured above: Martyn Hale outside Priory House, which he bought through his pension fund

The problems a Worcestershire business is having with its property lender are a perfect example of how financial institutions are crippling the chances of a UK recovery, according to Martyn Hale, managing director of HME Technology.

Three years ago, through his pension fund, Mr Hale bought the whole block of three units now known as Priory House, Saxon Park, Stoke Prior, Bromsgrove, for a total of £630,000.

For the past three years HME Technology, his family-owned business which is the tenant of the properties, has been profitable but his building society is now insisting on a new, higher rate for his monthly repayments.

Norwich & Peterborough Building Society (N&PBS) is insisting that as property values have dropped he must pay an extra 2% mortgage interest, taking his rate from 2.5% above base to 4.5% above base.

The society had wanted him to pay £1,200 for valuing the properties at a new lower value. "As they say, read the small print of our terms," notes Mr Hale.

He goes on: "It is ironic that one of the factors that have caused property values to fall is the reluctance of the financial sector to grant mortgages by reducing the loan to value to as low as 50%. Thus in order to protect, in our case, a 75% loan to value ratio for example they require either a reduction in loan by lump sum payment, more cover on other properties in the pension fund's portfolio, or as agreed a hike in repayments at the expense of capital contributions.

"And yet we have not missed a payment in three years, can show three years of profit and are probably one of the least worrying clients on any financial institution's books".

"This is a truly pathetic way of penalising healthy businesses in order to try and rebalance the screwed up and out of balance property loan books of the lenders.

"It is simple - successful businesses are being forced to pay more by greedy lenders."

He also said that the N&PBS has tried to claim that the Financial Services Authority (FSA) has caused this review of values, but when the society was asked for evidence he said it was unable to provide any to him.

He added that he had since followed up the claim with the FSA who had denied that there was such a mandatory instruction to lending institutions in place.

"We are paying our way and within two years I estimate that property values in this area of Worcestershire will have returned to their 2007 values".

"It is self evident that we in Bromsgrove in Worcestershire have not endured the same level of decrease as the national drop in commercial property values has shown due to Bromsgrove's location alongside the M5 and close by the M42, M6, M40 and M1, plus the mix of businesses located in this prosperous Midlands motorway commercial corridor," he said.

He added that N&PBS was also aware that in his case in September he won planning permission for house building on a vacant plot in a Lancashire town, and the proceeds of the sale of that site were to be used to clear the current borrowing, given the potential high value of the housing site.

"Notwithstanding our plans to clear our borrowings, the issue here is one of timing and of failing to understand how property values have not all decreased uniformly across the country".

"I cannot understand why our pension fund should be penalised for the failings of others when our position is demonstrably stable," he commented.

"The bottom line is that if we do not reduce the loan to within 75% of their value on the property, or give N&PBS more cover, they want to increase the base plus 2.5% to base plus 4.5% - with the extra 2% allegedly being to cover their greater risk, yet as I have pointed out repeatedly the family business over the past three years have been profitable tenants."

He said he did not believe that N&PBS was probably any different from any other lending organisation, but he believed it was important that this kind of discrimination against smaller businesses was unmasked for what it really was.

"Just a convoluted way of trying to get their successful customers to pay for their mistakes in lending to other customers who were not so secure.

"Or a cynic might think it was just a ruse to raise money," he said.