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Views on Halal mortgages

Journalist: Jake Carter, Mortgage Introducer

ended 29. September 2023

What makes them different from standard mortgages?

Are these products in high demand?

How do you go about advising clients for this product type?

Do you believe brokers need additional training to cater to these types of products?

What permissions do you need to advise on these? How do you become able to advise on these?

4 responses from the Newspage community

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Editor
Stephen Perkins
Managing Director at Yellow Brick Mortgages
Certainly not high in demand, we have had a handful of enquiries over the last 5 years and very few lenders offer these types of mortgages. They are just a way that you can convince yourself, mainly for religious purposes, that you are not paying interest by calling it rent to the lender, but ultimately you are still paying for credit. The regulated ones, do require special permissions from the FCA to advise on.
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David Robinson
Co-Founder at Wildcat Law
Interest is haram (forbidden) in Islam so a traditional mortgage would not work for strictly practising Muslims. The 2021 census recorded 3.9 million Muslims in the UK which would suggest a significant market for mortgage alternatives in the UK. There are two common methods used instead of mortgages:
1. The "bank" buys the property and then sells it to the client at a higher price with set instalments.
2. The "bank" buys the property and rents the property to the client with the client progressively buying amounts from the bank until they own it outright.
In practice, this market has evolved very slowly due to several limitations. The primary one is that traditional banks make their money from traditional interest-based lending therefore even if they offer a Shariah-compliant mortgage they themselves are not a Shariah-compliant business. This has left a small number of specialist businesses to work in this space that cannot service the full demand.
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Gary Bush
Financial Adviser at MortgageShop.com
I can't remember the last time that a Muslim client asked for one of these accounts, and even if they do we have arranged in the 35 years of practice none - mainly due to the fact that the standard products offer much better terms.
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James Bull
Mortgage Broker at JB Mortgages
Islamic mortgages are an extremely niche product and we get a minuscule number of enquiries around this type of lending. Normal mortgage permissions do not allow us to advise on this type of mortgage in any case, but we do have a good relationship with the State Bank of India where we can refer cases to them and they are happy to take over the advise process on our behalf.