Where can I get an Islamic Mortgage in the UK in 2024? | Market Overview

The Islamic mortgage market this year has gone through some drastic changes in the last few years. And as someone who is planning to buy a home, I’ve been monitoring it closely.

In this article, we’ll detail:

1. The main players offering Islamic Mortgages in the UK,?
2. Which provider is offering the best rates,?
3. Alternatives to an Islamic mortgage,?
4. And which provider I’ll personally be going for to purchase my new home

The Main Islamic Mortgage Providers Today?

An Islamic Mortgage is essentially the term used to describe HPPs (Home Purchase Plans) and currently are only offered by a few providers. Currently, the two main providers within the UK are Gatehouse Bank and Strideup.

They have the capital to deploy and are actively writing Islamic mortgage offers every month ranging into the tens of millions of pounds.?

There is also Al Ahli who are less well-known and not that active, primarily due to their focus being on serving overseas Middle Eastern clients looking to buy in central London. There is also Habib Bank AG Zurich – for the slightly more affluent end of the market. They are particularly active and competitive around commercial and buy-to-let mortgages.

This space might seem small, but it is possible that Al-Rayan may begin offering Islamic Mortgages again, and it’s common knowledge that there are at least three separate banks or mortgage providers currently in the various stages of their FCA and PRA application who are also planning to enter the market.?

Who is offering the best rates??

There are multiple variables to consider when it comes to looking at what rates are on offer? – how much deposit is being put down, how long is the preferred mortgage term, is the applicant overseas or not etc.?

In your particular circumstances, we recommend you visit our Islamic mortgage comparison engine and figure out your best options from there. This will allow you to compare and contrast your options which will inevitably make your choices clearer for you.?

But to give you a general sense of the market let us compare the 2-year, 80% FTV products offered by Gatehouse and Strideup. As of the 13th of June Gatehouse is offering 5.99% while Strideup is offering 6.59%.??

So Gatehouse is significantly cheaper at this product.?

However, if you move to a 5-year fixed product – the price difference is much smaller – 5.95% from Gatehouse and 6.19% from Strideup.?

Also – very crucially – to qualify for the Gatehouse green product is very difficult – you need a very high EPC certificate rating which the vast majority of homes don’t have.

So if we compare the standard Gatehouse rate (6.05%) for 5 years against the Strideup 6.19% you can see they are in touching distance.

So all in all, Gatehouse is slightly right now, but this changes from month to month. So visit our comparison engine and their websites for more up-to-date information.??

But overall, we’re really happy to see some more competition in the market! With the addition of more HPP providers joining the scene soon, we expect even better rates to come.?

Alternatives to an Islamic mortgage??

There are now a number of alternatives to Islamic mortgage providers currently available in the UK. This includes Pfida, Wayhome, Yourhome, Keyzy and others.?

These products are in design and theory really nice, but the big challenge with the housing market and developing a financing business is the need for scale and capital.?

At this moment in time Pfida is financing homes, but there is a waitlist of several year;. Wayhome isn’t actively financing homes; Yourhome finances a small number of homes every year and then you go onto their waitlist; Keyzy is actively financing a small number of homes.?

These products can often come with their own challenges too. They are mostly – but not always – more expensive than Islamic mortgages. They are often unregulated too, which isn’t the end of the world, but if something was to go wrong with the company, it would not be a good place to be.

Now how do they compare to HPPs or even each other? That’s a difficult question to answer as all these products are unique, so it does become difficult to compare them all.?

Which provider will I use??

As a man in his early thirties, buying my second home with a wife and two kids, I don’t really have time or inclination to experiment much. I would prefer a product that has thousands of other users, is predictable and understandable.??

Naturally, I also want the cheapest product I can get that is halal.?

Based on that, I will only focus on those products that actually have the money to deploy today, as I plan to move this year and can’t afford to wait for years on a waiting list. Also, I have a strong preference for regulated products, speaking as the CEO of Cur8 Capita, a regulated firm, I know how much additional oversight and protection comes with FCA authorisation.?

All of that means I will be choosing between Gatehouse and Strideup in the coming months and the deciding factor will mostly be the price.??

Does that mean I would discourage others from using some of the more innovative products? Absolutely not. But in my personal circumstance, it’s just not the right time or place. And if you decide to venture in the more experimental direction – understand you are taking a bit of a risk as the products aren’t as tried and tested, it is harder to compare them (as the providers are not legally obliged to make things as consistent with the market or as transparent as regulated firms) and you may have to wait for a while.

Final thoughts

The UK is proving very quickly to be a hub of real grassroots Islamic Financial institutions. With the increasing effect of the housing market and the difficulty many are facing in getting on the property ladder, these institutions may be exactly what the UK needs to increase homeownership rates. To this effect, I can only see this area of the market grow in the coming years which hopefully means sharia-compliant home finance schemes will become more accessible for all.?