Islamic Bank of Britain cuts rates for Sharia compliant BTL mortgage alternative
Islamic Bank of Britain plc (IBB, www.islamic-bank.com) the UK’s only wholly Sharia compliant retail bank, has lowered the rental rate for its Sharia compliant Buy to Let Purchase Plan (BTLPP) product range. The new variable rental rate of 4.89% will apply to both IBB BTLPP products, i.e.:
- Rent and acquisition BTLPP which requires a deposit of 25% (75% finance to value)
- Rent only BTLPP which requires a deposit of 35% (65% finance to value)
The 0.6% cut is the first in a series of changes that IBB is planning to release across its Home Purchase Plan (HPP) and BTLPP products in the coming weeks.
(NOTE: The terms ‘rental rate’, ‘rent only’ and ‘rent and acquisition’ for the IBB BTLPP range do not refer to the rental agreement between the customer and the tenants occupying the property. Instead they refer to the payment arrangement between the customer and the Bank, which usually consists of two elements, i.e. acquisition and rent payment. See below for a detailed explanation).
Both of IBB’s BTLPP products are available to landlords of any faith. Other features include:
• The ability to make additional acquisition payments, without penalty, subject to a minimum of £4,000
• No early payment charge for clearing the finance in full
• An administration fee of 1% (a minimum fee of £995 applies)
• Minimum property finance of £30,000, maximum finance of £500,000 (£750,000 in Central London) and minimum property value of £90,000
Commenting on the rate cut, Imran Pasha, Head of Sales and Service, Islamic Bank of Britain said, “IBB has kept up with the pace of change in the BTL sector by launching new products and now a rate cut of 0.6%. The Bank is committed to providing competitive Sharia compliant finance for landlords. It is also committed to providing intermediaries with the opportunity to grow their business from this buoyant market. With a competitive procuration fee for successful leads, which is currently matching the figures offered by other home finance providers for fully packaged cases, now is a good time for IFAs to consider working with IBB.”
Intermediaries can find out more by accessing IBB’s dedicated intermediary support service, the only one to be provided by a UK-based Sharia compliant finance provider. The service consists of a dedicated team of advisers, a telephone helpline (0121 456 7842) and a dedicated Intermediary website www.ibbintermediaries.com.
Upon registration intermediaries can introduce business to IBB by referral, i.e. the provision of customer contact details. If this results in the customer drawing down, IBB will pay the IFA a procuration fee of up to 0.5% (gross). This represents a competitive figure and allows IFAs to earn a fee that is equivalent to what other home finance providers may pay for a fully packaged application.
As a Sharia compliant product, IBB’s BTLPP differs from a mortgage where the customer borrows money from a lender which is then repaid with interest. A BTLPP uses the Islamic finance principles of co-ownership (Musharaka) with leasing (Ijara), where IBB and the customer buy the property as partners and the customer pays rent on IBB's share in the property.
The customer’s monthly payment, therefore, consists of an acquisition payment and rental payment. The former increases the customer’s share in the property and the latter is rent paid by the customer for the share that the Bank owns. At the end of the term, when all acquisition payments have been made and the finance has been settled, ownership of the property transfers fully to the customer. However, with a rent only BTLPP the customer’s payments only cover the rent paid to IBB and does not increase the customer’s share in the property. To acquire IBB’s share in the property the customer will need to make a lump sum payment at the end of the finance term.
The source of funds for IBB’s BTLPP is 100% Sharia compliant which means that IBB does not use any interest bearing instruments. Instead it uses its own funds or the savings deposits from its customers, all managed entirely in accordance with ethical and Sharia principles.
About Islamic Bank of Britain
Islamic Bank of Britain plc (the Bank, IBB) has pioneered Sharia compliant retail banking in the UK and now offers the largest range of Sharia compliant retail financial products in the UK. These include Sharia compliant mortgage alternatives, the Home Purchase Plan (HPP) and Buy to Let Purchase Plan (BTLPP), current accounts and savings accounts. The Bank was also the first to introduce Sharia compliant business banking to the UK, and now offers a wide range of institutional and business banking products and services, including Commercial Property Finance. Several of the Bank’s products remain unique in the UK retail financial market.
Sharia compliant banking operates without the use of interest and is founded on Islamic finance principles derived from trade, entrepreneurship and risk-sharing. IBB has a dedicated Sharia Compliance Officer (SCO) and a panel of respected Sharia Scholars, called the Sharia Supervisory Committee (SSC), which acts as an independent body to guarantee that IBB’s products and activities are Sharia compliant.
Whilst IBB offers products and services that are designed in accordance with Sharia principles, it is an inclusive, ethical organisation and welcomes customers of all faiths looking for a bank with a transparent, prudent and community-focused approach.
Notes to editors:
Interviews with Islamic Bank of Britain are available on request.
The bank should only be referred to as “Islamic Bank of Britain”. If abbreviated please use “IBB”.
Issued by Islamic Bank of Britain Plc, Edgbaston House, 3 Duchess Place, Birmingham B16 8NH