The Council of Mortgage Lenders is putting pressure on the Government to make it simpler and cheaper...
The Council of Mortgage Lenders is putting pressure on the Government to make it simpler and cheaper for UK mortgage lenders to provide Shari'ah-compliant mortgages.
At present, there is just one lender - the United Bank of Kuwait - which is able to provide Shar'iah-compliant mortgages in the UK, yet there is a growing population of Muslim potential homeowners who want to buy these interest-free products at a much lower cost and on an equal footing to existing mortgage products.
Payment or receipt of interest is strictly forbidden under Shar'iah law, so most Islamic mortgages are effectively the sale of property from a financier - at a higher price because there is no interest added - to the main buyer who then has to pay instalments for repayment of the capital.
But this adds unfair costs to the buyer, says the Council of Mortgage Lenders, as the buyer is paying two amounts of stamp duty and has to shift legal ownership of the property twice in a short space of time.
Similarly, other problems mean Islamic tenants of a council property are not allowed the Right to Buy, for example, as council properties can only be sold direct to the tenant and Islamic Mortgages require that the property goes first to the bank or financier.
There is also no State support with mortgage payments in financial hardship - albeit such support is now largely depleted - because the State only pays income support for mortgage interest and there is no interest on a Shar'iah-compliant mortgage.
Because of the slightly higher value of properties, financial institutions holding these products are required to hold higher capital weightings on Islamic mortgages too, says Michael Coogan, director-general of the CML.
"Regulatory changes would make it easier and cheaper for Muslims in the UK to get mortgage products which do not conflict with their beliefs. This would in turn help to make home-ownership more accessible and affordable for the UK's most significant religious minority."
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