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Last Updated: Tuesday, 1 July, 2003, 14:09 GMT 15:09 UK
High Street bank offers Islamic mortgage
A house with a sold sign outside
Some Muslims choose to pay for houses in cash
HSBC has become the first major UK bank to offer mortgages that comply with Islamic law.

Under Islamic law, the receipt and payment of interest is forbidden.

As a result some of Britain's two million Muslims have chosen not to take out conventional mortgages or open bank accounts.

This can leave them having to pay in cash for large purchases, such as houses.

Lease back

Under the HSBC scheme, the bank buys the property and leases it back to the customer over an agreed term.

It would make a real difference if there were more products on the market ... then there would be more choice for Muslims
Waseem Taj

The customer makes monthly payments made up of rent and contributions towards the purchase price.

HSBC owns the property until customers have made their final payment.

Crucially, at no stage is the customer paying interest - the paying of 'rent' is seen as a fair payment for use of the property rather than a charge for borrowing money.

In addition, HSBC is launching an Islamic law-compliant current account, which has no overdraft or credit card facility.

Money paid into the current account will be administered in accordance with Islamic law and not used for generating interest.

The current account and mortgage products are to be introduced in selected HSBC branches from 14 July.

Huge market

Previously only relatively small institutions such as the National Bank of Kuwait and the West Bromwich Building Society have offered tailored Islamic financial products for UK customers.

Some (Muslims) are wracked with guilt because they have broken Islamic law
Iqbal Asaria, Muslim Council of Great Britain

Last year a report from market analyst Datamonitor estimated that demand for Islamic mortgages in the UK was so strong that gross advances could reach 4.5bn ($7bn) in 2006.

According to Iqbal Asaria, spokesman for the Muslim Council of Great Britain, HSBC's move is long overdue.

"Some (Muslims) are wracked with guilt because they have broken Islamic law. While others' values are beyond question, they are more pragmatic in order to keep a roof over their family's head.

"HSBC's initiative frees them from this dilemma and is the first step to delivering a level playing field for Muslims seeking financial solutions in the UK."


Have you used, or would you like to use, Islamic financial services in the UK? How easy was it to find what you wanted and how well did the service meet your requirements? What more could financial service providers do? Let us know using the form below.

Your comments:

I tried to find an Islamic mortgage but could not find one when I bought my house last year in Leeds. I hope that it will be easier in the next few years.
Dr A Mir, UK

Will the Islamic Mortgage be available to non-Muslims?
Rumana Sheikh, UK

I have always asked my banks not to pay me interest on my money, but most banks don't have that facility, so I have the interest moved to a savings account. If a bank was to offer me the facilities then I would move my mortgage and banking over to them. I feel guilty each time I use the bank's facilities as I have no option but to use them
Tuhel Miah, UK

Finally, UK banking wakes up to the needs of the Muslim community. I've been looking to buy a house with the National Bank of Kuwait. Now I can use my own bank, HSBC.
Muhammed Sheikh,

This is all very well, but I am interested in finding out how much down-payment one would have to make (as much as 30% of the property price was required by some of the other institutions mentioned)? We need to ascertain whether this really helps people on low income and/or gives them the same opportunity as others!
Rukon, UK

I can't believe that people are falling for this. You can call it anything you want - at the end of the day, what the consumer is paying is interest to the banks, except it's dressed up as 'rent'. At the end of the day, one could take the same view of the current system and think of the monthly mortgage payments as rent.
Shamaz Majid, England

Does this mean that these mortgages will be completely shielded from interest rate fluctuations? If so, this may appear a little unfair to non-Muslim customers, unless this product is to be made available to all. This type of mortgage would be fantastic for anyone needing to remain within a strict budget, especially in the long-term.
Saima, UK

I would love to see Islamic financial products introduced in the USA. If you think UK has a huge market for it, wait till you survey the US market. Muslims & non-Muslims here are thirsty for interest-free solutions
Samir Kauther, USA

Not surprising that HSBC have taken this action as they have a large presence in the middle east. An important point for all muslims to remember is that even though Islamic Mortgages may be more expensive than conventional interest based mortgages, because they are Halal they must be your first choice. What we require now is more solicitors to understand the legalities and processes involved in purchasing a property using an islamic mortgage.
Abid Ghani, UK

A long-awaited product range that the Western Banks could have offered years ago. Nevertheless it's a good move. I'll be quick to switch my mortgage over.
azad, england.

I (along with many) have always wanted easy access to Islamic financial services in the UK. Until now only a few of the "smaller" banks have offered anything that remotely match the requirements of Islamic Law - unfortunately, many of these services involve the consumer having to pay out much more in the long term when compared against a conventional mortgage. Personally, I'm glad that HSBC have been the first of the "big banks" to offer this service, as I have been a life-long customer and have never had problems with them.
Mueed, UK

Unless the mortgages are completely untied to underlying interest rates, the suspicion remains that 'rent' is just another term for interest. Other considerations would include questions on where the bank is getting money to buy these properties - if it's in the normal way, then that money is already tainted, and crucially, what happens when a 'tenant' is struggling to make the 'rent' - in any Islamic business, the service-provider has to share any risk with the purchaser.
Taz Uddin, England

Islamic mortgages are by no means a perfect solution to Muslims, but at least they are a step in the right direction at avoiding in dealing with interest based products. I have currently got a Manzil loan (Ijara scheme - repayment based on leasing) with the United Bank of Kuwait (UBK). The administrative costs were very high and the application process was slow and complicated. My repayments are high too, compared with conventional high street products, but this is mostly to do with economies of scale. I can understand why many Muslims are put off by the UBK home financing schemes. More competition and products in the area of Islamic finiancing is most certainly welcome.
Abdul Mumin Choudhury, Bristol, UK

It is a good idea that such products are becoming availalbe, irrespective of whether it has been launched by a Western Bank. If the products themselves stand up on their own (and comply with Shari'ah)and provide a real alternative to the conventional mortgage even if it is a little bit expensive, we should seriously consider this form of financing. It is only a matter of time until this form of financing directly competes with the conventional mortgages and provides a choice for Muslims and Non-Muslims alike. After all the concept of fairness and equity is universal.
Nurul Alam, London, UK

I have also heard that there will be 3 other new providers of Islamic mortgages launching products in the autumn- so there will be some competition. In many countries where Islamic mortgages have existed they are also the favoured option by non-muslims. It will be interesting to see what happens over hte next few years.
Saiyyidah, London, UK

I for one am very glad, I have a mortgage with UBK and I know several of my friends want an islamic mortgage but cannot afford the deposit which is substantial. As for those who say its interest dressed up as rent then all I can say is at least we are trying to follow a more islamic path and these schemes have been approved by our scholars hence we have no guilt :)
Kasrul Islam, UK

A rose by any other name Surely this is just a way of "getting around" the interest problem.
John Reid, England

I don't understand why paying interest causes such a problem for Moslems when the Bible bans the payment of interest as well and calls it an abomination - Ezekiel 18:13. Those who pay it "shall surely die". Why don't Christians care about it?
Craig, Scotland

I'm pleased that banks are waking up to the needs of their minority customers - but frankly I'd like to see them wake up to the needs of their majority customers with services like longer opening hours, shorter clearing times (why does it still take 3/4days to clear money?) and services for customers with poor credit ratings. It took several years with a big stick from the government to get any movement on that on didnt it? What pressure needs to be put on them to open outside 'civil service' hours or re-open local branches?
Tony Al-Naqib, England

I'd like to know whether the "Islamic" mortgages will work out more expensive than the "non-Islamic"...So instead of paying interest, at say a modest 5%, I could be ripped off by someone exploiting my guilt?
Omar Mughal, UK

A fine idea in theory, but (a) the whole banking system is run on non-Islamic principles anyway; and (b) if the bank really "owned" the property (any more than a a purchase on an interest based mortgage) then the property buyer would never be able to own the property as its value would escalate each year as house prices rise. Anyone who thinks that this is anything more than an expensive "interest" mortgage is deluding themselves. Devout Muslims should wise up and realise that there are better things you can do with your money than give it to the banks (eg donate any savings or interest earned on interest-based accounts to charity).
aa, UK

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WATCH AND LISTEN
The BBC's Wyre Davies
"This new scheme has the backing of the Muslim Council of Britain"



SEE ALSO:
Islamic mortgages 'worth billions'
29 Nov 02  |  Business
UK to encourage Islamic mortgages
18 Feb 02  |  Business


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