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Islamic mortgages aiming at wider audience

18th April 2005 | back to article listings BACK    print this article PRINT

Muslims throughout the UK are being offered greater opportunity to opt for Islamic mortgage products designed to operate within Sharia law, which is incompatible with the paying or earning of interest.

Demand for such products has grown over recent years, with the UK's Muslim population looking for financial services and long-term mortgage deals that do not compromise the Muslim belief system. Currently, there are somewhere in the region of two million Muslims living in the UK, and financial providers are beginning to see the potential benefits of targeting that specific customer base.

Last month Lloyds launched a special Islamic mortgage aimed at Muslims who have decided not to buy a home for religious reasons, or had been forced to take up traditional mortgages. The launch of this service came a year after the UK's first specialist Islamic bank opened last year, the London-based Islamic Bank of Britain. In February this year Lloyds introduced an Islamic current account along these lines. The bank's mortgage product stipulates that Lloyds would not lend money, instead buying the house by providing up to 90 per cent of the purchase price. Following this the customer would pay the remaining amount and pay the total sum back over an agreed term.

Until now, Lloyds Sharia-compliant mortgages have only been available in London, Luton and Birmingham, and similar services have been offered by HSBC's Amanah arm, Islamic Bank of Britain and Ahli United Bank. The trend looks to be spreading nationwide with the launch of a new product from Tods Murray. New reports state that the law firm is ready to introduce Islamic mortgages in Scotland, where some 60,000 Muslims live.

Head of banking at Tods, Graham Burnside, identified problems with existing legislation whereby there was an exemption from the second stamp duty charge designed to fit products designed under English law. "We were approached by UNB to set up the first Islamic-compliant mortgage in Scotland but it soon became clear to me that it could not be structured the same way as in England, because of the wording of the tax statutes," he told the Herald. "The Muslim community in Scotland would still be in line for the penalty. We're now at the stage of proof-reading the printed version (of UNB's new product). We will be moving ahead with the launch shortly."

These developments underline continued industry efforts to appeal to the widest possible customer base.

This is a press release by Assetz also available at http://press.assetz.co.uk/articles/1817.html. Alternatively, please see our full press release archive.

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