Islamic Bank of Britain cuts BTL finance rental rates again
Islamic Bank of Britain plc (IBB, www.islamic-bank.com) the UK's only wholly Sharia compliant retail bank, has further reduced the rental* rate for its Sharia compliant Buy to Let Purchase Plan (BTLPP) product. Landlords with a deposit of 35% (65% finance to value) can now access finance from just 4.49%**, with an option to take a rent-only* BTLPP. The 0.4% cut is the latest in a series of rental* rate reductions the Bank has applied to both its residential and buy to let finance products.
Landlords, of all faiths and ethical beliefs, can now access Sharia compliant and ethical rental property finance with deposits of 25% and 35% as follows:
- 25% deposit (75% finance to value)
- Discounted variable rental* rate BTLPP at 4.89%** (discounted by 0.60%) until 30 June 2015
- Payment consists of both acquisition and rent payments*
- 35% deposit (65% finance to value)
- Discounted variable rental* rate BTLPP at 4.49%** (discounted by 1.00%) until 30 June 2015
- Payment can either be rent-only or acquisition and rent*
Other product features include:
- The ability to make additional acquisition payments, subject to a minimum of £4,000 and a small administration fee
- No penalty for clearing the finance in full early
- 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 new rental* rates and products, Imran Pasha, Head of Sales and Service, Islamic Bank of Britain said, “IBB has reduced its rental* rates again, specifically for landlords with a deposit of 35%, to 4.49%**. This deal comes with a rent-only* payment option, which helps to lower the landlord’s monthly payments even further. IBB’s recent rental* rate reduction has been made in response to demand from investors keen to access affordable, Sharia compliant buy to let products which allow them to maximise the potential of the active rental market.”
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.
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 (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 explanation entitled ‘How does a BTLPP work’ in the notes below for more details.
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.
*The terms ‘rental rate’, ‘rent only’ and ‘acquisition and rent’ 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. an acquisition and a rent payment. See the explanation entitled ‘How does a BTLPP work’ in the notes below for more details).
**At the end of the discount period rental rates will revert to the IBB Buy to Let Finance Rental Rate, which is currently 5.49% (Bank of England Base Rate (BBR) + 4.99%). This is the Bank’s revert rental. The IBB Buy to Let 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 4.99%), though margin increases are capped at 2.00% above the margin that applied at the outset.
‘How does a BTLPP work?’
The principle difference between a BTLPP and a conventional mortgage is that the lending/borrowing relationship does not exist. Instead, BTLPPs 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. 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 customer can buy the Bank’s share, in part or full, or sell the property at any time without incurring any penalty charge subject to clearing the IBB finance amount in full. The Bank does not claim any share in any appreciation of the property.
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