Islamic Bank of Britain launches new home finance deals with its lowest ever rental rates
Islamic Bank of Britain plc (IBB, www.islamic-bank.com), the UK’s only wholly Sharia compliant retail bank, has launched new home finance deals with rental rates starting at 3.59%*.The following IBB Home Purchase Plans (HPPs) are available to consumers with a deposit of 35% (65% Finance to Value (FTV)):
I.Discounted variable rental rate HPP at 3.59%* (discounted by 0.90%) until 30 June 2015
II.Fixed rental rate HPP at 3.79%*, fixed until 30 June 2015
HPPs are Sharia compliant, ethical mortgage alternatives, available to consumers of all faiths and beliefs.
Commenting on the launch, Imran Pasha, Head of Sales and Service, said, “This is the first time IBB has offered home finance to consumers with a 35% deposit. The launch will benefit home buyers with a larger deposit, existing homeowners looking at re-financing deals or those seeking to release some equity from their property. They now have access to a competitive, Sharia compliant and ethical finance product; rental rates start at 3.59%* with a low product fee of only £399 and flexible terms.”
IBB’s move follows a recent rental rate cut by the Bank on its 80% FTV HPP (20% deposit requirement).Rental rates start at 3.99%* for the discounted variable rental rate HPP (discounted by 0.50% until 30 June 2015), with low product fees of only £399 and flexible terms.
Furthermore, all of IBB’s HPPs, including its fixed rental rate products, allow customers to settle the finance in full at any time, without incurring an early settlement penalty 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 (Diminishing 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.
*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. The IBB Home Finance Rental Rate is subject to quarterly rental reviews when the Bank will consider changes to its rental rate as well as changes to the Bank’s margin (currently 3.99%), though margin 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 and a conventional mortgage is that the lending/borrowing relationship does not exist. Instead, HPPs are based on co-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:
Rental 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 a lease (Ijara) 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 co-ownership (Diminishing Musharaka) agreement. With every payment the customer’s equity in the property increases and the rental element decreases, reducing the Bank’s share in the property on a diminishing basis.
For all of IBB’s HPPs, including its fixed rental rate products, the customer can buy the Bank’s share in full, or sell the property at any time, without incurring an early settlement penalty charge, subject to clearing the IBB finance amount in full. The Bank does not claim any share in any appreciation of the property. Part acquisition payments may also be made subject to a small admin fee, except whilst a fixed rent rate applies.
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 and Prudential Regulation Authority 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 8NHGo Back