Sharia

Lack of awareness behind low demand for Sharia-compliant mortgages

Specialist Sharia Islamic mortgages are available with certain lenders, and while take-up is currently low, this could improve if brokers change tack.

While brokers strive to offer Sharia-compliant mortgages, Lilla Dilliway, mortgage and protection adviser at BlueWing Financials, suggests that the low demand is because applicable borrowers are unaware that a Sharia-compliant mortgage is a possibility, especially in the UK.

A poll by Mortgage Solutions to establish how much Sharia-compliant business brokers are placing each year found that only 5.5% of respondents placed between one and ten mortgages and another 5.5% placed between ten and 20 Sharia-compliant mortgages in the past year.

Even though there seems to be a lack of market demand, all the brokers that participated in the poll said they wanted, and attempted, to offer Sharia mortgages, but found that many clients still choose mainstream products.

When compared, a Sharia mortgage’s part rent, part capital repayment aspect means that borrowers may find it difficult to meet the affordability criteria and/or have eligibility issues based on their credit history. Sharia-compliant mortgages are often also more expensive due to the higher administration costs of the lender, which for many borrowers will be a deciding factor.

Steve Jackson, owner of Jackson Potter Mortgage Brokers, said: “In my experience, a lot of people have gone down the route of applying for a Sharia mortgage and ultimately, for whatever reason have not been able to get there, and it’s been declined.”

He added: “When they’re rejected, they go back to the mainstream market and perhaps return in a couple of years to see if they would be accepted by a Sharia-compliant lender.”

An option for buy-to-let

Despite the lack of demand for residential Sharia-compliant mortgages, Jackson Potter Mortgage Brokers have found that it is an option for some of their buy-to-let clients. “A lot of them are investors and looking to invest in that compliant manner, hence why that’s our niche,” said Jackson.

Dilliway suggests that if Sharia-compliant mortgages were advertised and promoted in the same way as mainstream mortgages, an increase in take-up might be seen.

Akhil Mair, managing director at Our Mortgage Broker, agrees: “The demand – and more importantly the actual product – is not widely marketed nor something that even comes in conversation.”

Currently, six standalone Islamic banks are operating in the UK, and there are a further 20 banks offering Sharia-compliant products. Al Rayan Bank has the broadest offering for borrowers, but challenger bank Gatehouse launched its Sharia-compliant mortgage, known as a home purchase plan, last year making it available to UK residents, international residents and expats.

With Islamic Finance one of the fastest growing areas in financial services, perhaps it’s time for the lenders to listen to the brokers and consider marketing to the mainstream.

Self-certified Sophisticated Investor

Please read

I declare that I am a self-certified sophisticated investor for the purposes of the restriction on promotion of non-mainstream pooled investments. I understand that this means:

I am a self-certified sophisticated investor because at least one of the following applies:

I accept that the investments to which the promotions will relate may expose me to a significant risk of losing all of the money or other property invested. I am aware that it is open to me seek advice from someone who specialises in advising on non-mainstream pooled investments.

High Net Worth Investor

Please read

I make this statement so that I can receive promotional communications which are exempt from the restriction on promotion of non-mainstream pooled investments. The exemption relates to certified high net worth investors and I declare that I qualify as such because at least one of the following applies to me:

STAY AHEAD OF THE MARKET

Sign up for first access to new developments and exclusive property investment opportunities.

We send limited and targeted emails on new launches and exclusive deals which best fit your areas. We are trusted by over 30,000 active buyers as their source for new stock.

  • New property developments
  • Professional market reports
  • Property deal alerts
  • Development updates
Manchester property investment

FIRST FOR NEWS AND KNOWLEDGE.

Receive trending news straight to your inbox and stay up to date on all of the property market trends and advice.

Established since 2005 we are a leading voice of authority and commentary on the UK property market. Our news is trusted by Apple News & Google News.

  • UK housing market
  • Mortgage & money
  • Buy-to-let landlords
  • Guides & advice

Talk to us

Speak to our UK property experts today:

 

+44 (0) 333 123 0320

Open from 9am-6pm GMT

 

+852 6699 9008

Open from 9am-6pm HKT