Terrace Row of houses

Al Rayan Bank announces products to support first-time buyers and homeowners looking for Sharia compliant refinance options

08 July 2020

Following the latest Government guidance on the property market, Al Rayan Bank is reintroducing its low deposit 90% and 95% finance-to-value (FTV) Home Purchase Plan (HPP) products

Rental rates on Fees Assisted HPP range for customers looking to refinance are also reduced by 0.15%

Al Rayan Bank, the UK’s oldest and largest Islamic bank, has announced that it is re-introducing its 90% and 95% finance-to-value (FTV) Home Purchase Plan (HPP) range to the market, giving first-time buyers with as little as 5% deposit the opportunity to get on to the property ladder.

The move follows a temporary pause on home finance products above 85% FTV due to the coronavirus outbreak and subsequent lockdown in March. The product will initially be available to customers based in England and is available as a two-year and five-year fixed rental rate HPP*.

Al Rayan Bank has also repriced its Fees Assisted HPP product range, reducing rental rates by 0.15%. The bank has made two-year and five-year Fees Assisted HPPs available to customers up to 80% FTV. ‘Fees Assisted’ means the Bank will assist with customers’ refinance costs by waiving or contributing towards some of the upfront fees normally associated with refinancing home finance from one provider to another.

Customers benefit from £300 cashback and up to £600 contribution towards valuation fees. In addition, the Bank will waive its £499 admin fee to support with payments. The new Fees Assisted HPP rental rates are available to UK residents and expats looking to purchase property in the UK, with rental rates from 3.04% for UK residents and 3.24% for expats**.

As well as offering competitive finance rental rates, all of Al Rayan Bank’s products, including HPPs and Buy to Let Purchase Plans, are Sharia compliant.

HPPs are based upon the Islamic finance principles of co-ownership (diminishing musharaka) and leasing (Ijara). Unlike a conventional mortgage, customers buy or refinance the property as a partner with Al Rayan Bank and pay rent on the share that Al Rayan Bank owns. Each monthly payment increases the customer’s share in the property and at the end of the finance term, they will own their home outright without interest being involved in the transaction.

Maisam Fazal, Chief Commercial Officer at Al Rayan Bank, said: "We want to ensure that Sharia compliant options are available to consumers who can afford the payments on home finance but may not have a large deposit saved, that’s why we’ve reintroduced the low deposit range to the market.

"We recognise there are a range of dynamic housing needs within the UK, particularly in the current climate. We know the coronavirus outbreak halted plans for many and hope the introduction of the 95% FTV range will support first-time buyers looking to get on to the property ladder. We are very proud to be the only UK Islamic bank to serve this crucially important sector of the market.

"We also hope that by reducing the rental rate on our fees assisted range, more consumers will consider moving their home finance to an ethical, Sharia compliant alternative."

Al Rayan Bank currently serves over 90,000 customers through its branch, telephone and mobile banking channels.

As an independent UK bank, Al Rayan Bank is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

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