THE head of Barclays has snubbed his own bank and taken out a mortgage with one of its main rivals.

John Varley, the bank’s chief executive, mortgaged his London town house with HSBC last year, shortly after being promoted to the top job at Barclays. The bank’s finance director and deputy chairman have also chosen against taking out mortgages with Barclays, in favour of home loans from Royal Bank of Scotland and Lloyds TSB.

The revelation has been seized upon by consumer groups and MPs who warned that the public will react badly to the lack of loyalty shown to the bank’s own products by those at its helm.

Jim Cousins, a Labour MP and member of the Treasury select committee which has investigated the high street banks, said: “Anyone who is a customer of Barclays will think the behaviour of these directors is a damn poor show. It is a real signal to Barclays customers to get out and find better deals elsewhere.”

Barclays recently described the competitive pricing of some rival mortgages as “suicidal” and has stealthily hiked fees on its products.

HSBC broke ranks with the other high street banks in 2004 by offering simple “no-catch” mortgage deals, which promise not to charge hidden fees.

Varley, 50, was appointed group chief executive of Barclays in September 2004 after a 22-year career with the bank, including eight years as a senior executive.

However, in January 2005, four months after taking over the country’s third-biggest bank, Varley, married with two children, decided to sign up for an HSBC mortgage. The house is worth an estimated £1.5m.

Although the size of his loan is not known, HSBC’s standard rate available at the time was 5.5%, more than a percentage point lower than Barclays’ standard rate. An extra per cent of interest adds £1,000 to the annual cost of a £100,000 loan.

When Varley took out his mortgage, HSBC was the cheapest lender on the high street, according to an annual survey from Moneyfacts, an independent supplier of financial data. It was also named in the What Mortgage Awards as the best-value national bank over two, five and 10 years for the fifth year running.

Varley is not the only member of the Barclays boardroom to prefer rival banks’ products for his personal finances. Naguib Kheraj, the group finance director who has been at Barclays since 1997, has a mortgage with Coutts, the private banking arm of the Royal Bank of Scotland used by the royal family. Kheraj, who previously headed Barclays’ private bank, took out the loan in September 2002.

Kheraj, who made his name as one of the most successful traders in the City, lives in a £5.5m house in Belgravia, central London, where his neighbours include Roman Abramovich, Baroness Thatcher and Lord Lloyd-Webber.

Sir Nigel Rudd, deputy chairman of Barclays and head of the company’s brand and reputation committee, has a mortgage with Lloyds TSB on his country estate in Derbyshire. He has had the home loan since 1992 and has not switched banks despite joining the board of Barclays in February 1996.

The disclosure of the private mortgage arrangements of the bank’s top executives is the latest in a series of setbacks for Barclays’ reputation.

Matthew Barrett, the bank’s chairman, infamously admitted to a parliamentary committee in 2003 that he did not borrow on credit cards because they were “too expensive”.

Earlier in the year, when unveiling Barclays’ annual results to shareholders, he effectively admitted that his bank’s mortgage rates were uncompetitive after criticising rivals for offering lower deals.

Barclays recently announced record pre-tax profits of £5.3 billion, earning Varley a £2.85m pay package. However, Woolwich, its mortgage arm, saw its market share decline as customers followed the example of the Barclays directors.

A spokesman for Barclays said yesterday that the executives had been reluctant to take mortgages elsewhere but did so because they wanted to keep their personal finances private from fellow executives.

He said that if they had taken out loans from Barclays, these would have to be declared in the small print of the bank’s annual accounts and to fellow bank directors.

However, he conceded that it would not be possible to calculate the value of their mortgages from the declarations in the accounts because it was an aggregate figure for all directors and senior management. The identities of those taking loans were therefore anonymous to the public.

For example, James Crosby, the chief executive of Halifax Bank of Scotland, has a mortgage from his company but this cannot be determined from the firm’s annual report.

Barclays accounts reveal that four directors and seven senior managers have mortgages and other loans from the company totalling £805,000. Members of the board already have to declare details of their salaries, pensions and other perks in the accounts.

The spokesman said: “It should be noted that any borrowing from the bank by Barclays directors would need to be disclosed on an aggregate basis in the bank’s annual report under party dealings and loans to directors. This information would also be disclosed on an individual basis to the board and some employees.

“While the directors would prefer to hold their mortgages with Barclays as the bank offers a range of competitive products, the level of disclosure of personal and family finance issues could be intrusive in their private lives.”

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