Islamic Bank of Britain lowers its home finance rental rate
Islamic Bank of Britain plc (IBB, www.islamic-bank.com) the UK’s only wholly Sharia compliant retail bank, has lowered the rental rates for its Sharia compliant Home Purchase Plans (HPPs), by launching a new discounted variable product available with a rental rate of 3.99%*. HPPs are Sharia compliant, ethical mortgage alternatives available to customers of all faiths and ethical beliefs.
Commenting on the changes, Imran Pasha, Head of Sales and Service, said, “Islamic Bank of Britain home finance offers great value. Its Home Purchase Plans are available with a deposit of only 20%, with rental rates as low as 3.99%*, a product fee of only £399 and flexible terms. This bucks the market trend in many ways. Some banks use low headline rates to attract the customer, but these are coupled with high product fees which cancel out any savings the low rate offers. IBB doesn’t take this approach; it is simply committed to offering fair rates and terms which deliver good value over the long term.”
Consumers with a deposit of only 20% looking for home finance can access the following HPPs from IBB:
- Discounted variable rental rate HPP at 3.99%* (discounted by 0.50%) until 30 June 2015
- Fixed rental rate HPP at 4.19%*, fixed until 30 June 2015
IBB HPPs are available for new purchases, refinancing or to release additional capital, and offer the following additional benefits:
- The ability to make extra capital payments without incurring a penalty
- The ability to settle the finance at any time without incurring a large early repayment charge
As a Sharia compliant product, IBB’s HPP differs from a mortgage where the customer borrows money from a lender which is then repaid with interest. A HPP 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. 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. See the ‘How does a HPP work?’ section below for a full explanation.
As an Islamic bank, IBB does not use any interest-bearing products to finance customer’s homes. Instead it uses its own funds, or the savings deposits from its customers, all managed entirely in accordance with ethical and Sharia principles.
IBB offers consumers a different approach to banking. As an Islamic bank it is based on a more equitable system of finance than conventional interest-based banking. Each product offered by IBB uses specific Islamic finance principles that are derived from trade, entrepreneurship and risk-sharing in which the customer and Islamic bank work together as partners towards a mutually profitable end. The whole premise of Islamic finance is to provide a way for society to conduct its finances in a fair, ethical and socially responsible manner.
*At the end of the term rental rates will revert to the IBB Home Finance Rental Rate, which is currently 4.49% (Bank of England Base Rate (BBR) + 3.99%). This is the Bank’s revert rental rate which is similar in concept to the Standard Variable Rate (SVR) of a conventional mortgage. The IBB Home Finance Rental Rate is subject to quarterly rental reviews when the Bank will consider changes to the BBR (currently 0.5%) as well as changes to the Bank’s margin (currently 3.99%), though price increases are capped at 2.00% above the margin that applied at the outset.
How does a HPP work?
The principle difference between a HPP/BTLPP and a conventional mortgage is that the lending/borrowing relationship does not exist. Instead, HPPs are based on joint ownership and lease agreements arranged using two separate principles of Islamic finance. For this reason interest does not form part of the arrangement and each monthly payment consists of the following two elements:
Rent element – this is the amount that the customer is paying to the Bank as rent on the Bank’s share of the property. This is in accordance with an Ijara (lease) agreement.
Acquisition element - this is the amount that the customer is paying to purchase a part of the Bank’s share in the property. This is in accordance with a Diminishing Musharaka (partnership) agreement. With every payment, the customer’s equity in the property increases and the Bank’s share in the property decreases. The rent element also decreases with each acquisition payment.
The customer can buy the Bank’s share, in part or full, or sell the property at any time without any penalty subject to clearing the IBB finance amount in full. The Bank does not claim any share in any appreciation of the property.
Minimum finance £30,000, maximum finance £750,000. Minimum property value £90,000. Islamic Bank of Britain plc. uses affordability criteria under which a customer’s income and expenditure are assessed.
Offer may be withdrawn at any time without notice. Subject to status. Terms and conditions apply.
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.
The Bank is authorised and regulated by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) and is a member of Financial Services Compensation Scheme.
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