The Islamic Bank of Britain has launched Britain’s first sharia-compliant mortgage under the government’s Help to Buy scheme.
The original Help to Buy scheme was launched in October 2013 to increase the availability of low-deposit finance for UK households.
According to data from the IBB, 83 per cent of customers who opened a deposit account between January 2013 and August 2014 were non-Muslim.
Key Features
■ The Islamic Bank of Britain’s new Home Purchase Plan comes at a ‘rental’ rate of 4.99 per cent, fixed until 31 December 2017, based on a deposit of 10 per cent.
■ HPP uses the Islamic finance principles of co-ownership (diminishing musharaka) with leasing (ijara), whereby the bank and the customer buy the property as partners and the customer pays rent on the bank’s share in the property.
■ At the end of the term, when all acquisition payments have been made and the finance has been settled, ownership of the property transfers fully to the customer.
■ The IBB will charge an administration fee of £999 on the loan.
Adviser verdict
Stephen Abbott, owner of Stephen Abbott Financial Services in Bradford, said: “These are not very well advertised, but I have used them in the past. A lot of people seem to like Sharia mortgages.
“IBB is expensive compared to some of the other lenders, though having said that, its discount rates are not outrageous. We get a fair take up of Help To Buy mortgages in Bradford, even though house prices are cheap.”
