Al Rayan Bank (UK) lowers its Home Purchase Plan rental rates
Al Rayan Bank (UK) today announced that it is making ethical Sharia compliant home finance affordable to even more people by reducing the rental rates on its entire Home Purchase Plan (HPP) range. As part of the reduction, the Bank has introduced the lowest HPP rental rate in its history, 2.69%* on its 60% finance to value (FTV) discounted variable HPP, meaning that a typical customer requiring home finance of £200,000 over 20 years, who chooses the 60% FTV discounted variable HPP could expect to save £720 a year on payments whilst they were in the discounted period.
In addition to the reduced rental rates for the 60% FTV HPP, Al Rayan Bank has also lowered the rental rates on its 70% FTV, 80% FTV and 90% FTV HPPs. The new rental rates are as follows:
- 60% finance to value (FTV): requires a 40% customer contribution, with a fixed rental rate of 2.89%* and a discounted variable rental rate of 2.69%*
- 70% FTV: 30% customer contribution, with a fixed rental rate of 2.99%* and a discounted variable rental rate of 2.79%*
- 80% FTV: 20% customer contribution with a fixed rental rate of 3.19%* and a discounted variable rental rate of 2.99%*
- 90% FTV (backed by the Help to Buy HPP guarantee scheme) requires a 10% customer contribution, with a fixed rental rate of 4.49%*
Rental rates apply until 30 September 2018 for the 60%, 70% and 80% FTV HPPs and until 30 September 2019 for the 90% FTV HPP. Thereafter all rental rates will revert to the Al Rayan Bank Variable Rental Rate, which for Home Purchase Plan is Bank of England Base Rate (BBR) +3.99%.
HPPs are an ethical, Sharia-compliant alternative to conventional mortgages, which do not involve interest, as this is prohibited in Islam. They work on the Islamic finance principles of Musharaka (partnership) and Ijara (leasing). The customer and Bank purchase the property together as partners. Over time the customer buys the Bank’s share in the property, paying a rental charge on the portion that they do not yet own. When all acquisition payments have been made, full ownership transfers from the Bank to the customer.
As an Islamic bank, Al Rayan Bank does not charge arbitrary administration fees to its HPP customers; instead administration fees reflect the costs incurred by the Bank. This means that they are often substantially lower than many of the fees charged by conventional banks. The administration fee for the 60%, 70% and 80% FTV HPPs is £399 and for the 90% FTV HPP it is £999, due to additional costs involved with the Government’s HPP guarantee scheme. As with all of Al Rayan Bank’s home finance products there are no penalties for early settlement, even within a fixed rental rate period.
Al Rayan Bank has been a pioneer of British retail Islamic banking for 12 years. The first wholly Sharia compliant retail bank in the UK, the Bank has earned a reputation for providing innovative products which appeal to people of any faith. Last year Al Rayan Bank was named by Global Finance magazine as one of the best Islamic banks in the world, in its annual list of the World’s Best Islamic Financial Institutions, and by Trade Finance Global as the Best Islamic Finance Services in Western Europe.
As an independent UK bank, Al Rayan Bank is authorised by the Prudential Regulation Authority, regulated by the Financial Conduct Authority and the Prudential Regulation Authority and is a member of Financial Services Compensation Scheme.
Intermediaries only: Intermediaries can find out more by accessing Al Rayan Bank’s dedicated intermediary support service, which can be contacted on 0800 694 7238. Upon registration, Intermediaries will be able to introduce business to Al Rayan Bank by referral, i.e. the provision of customer contact details.
* Subject to status. Terms and conditions apply.
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