Islamic mortgage provider targets mainstream ‘ethical’ buyers

Islamic banks are looking to attract green and ethical customers Credit: Per Magnus Persson/Getty Images

Adam Williams
5 December 2018

Specialist banks are aiming to broaden their appeal by offering an “ethical” way for people to purchase a house.

Islamic mortgages have become a niche proposition since high street names HSBC and Lloyds Bank left the market more than five years ago, but specialist lenders are now looking to breathe new life into the sector.

Sharia-compliant mortgages typically work in the same way as traditional home loans. A bank helps finance the purchase of a property, with the customer making monthly payments until they own the whole property.

However, rather than an interest rate, a “rental rate” is charged on the part of the property owned by the bank. This is because interest cannot be charged under Islamic law.

Because of this difference, such arrangements are often called home purchase plans (HPP) rather than mortgages.



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