mbga9pgf is correct, look very carefully, this deal is not as good as it looks. If you borrowed £8500 and the inland revenue decide that the average mortgage rate is 5% then you have had a benefit of £425 each year which is taxable (probably at 40%). Therefore this benefit is now costing you £170 per year to have.
Then realise that the Inland Revenuse's 'notional' mortgage rate is a lot higher than you can buy on the high street. (so you could have got the loan at 4% from a high street bank, therefore the differenec between the £170 the loan is costing you from MOD and d a 4% motgae rate( £340) is £170/.
Add that to the cost of setting up, the cost of transferring this charge to any subsequent mortgage (see posts above). Then you have to pay this loan back within 10 years. If you took the loan because you were short of cash, what is the impact of having to pay large amounts back each month, when if you had used a standard mortgage with the spread of interest being be over 25 years?
The overall benefit is negligible for the avrage Aircrew officer. The hassle and commitment is just not worth it.