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HPPs operate completely without interest, or riba, and that is the fundamental difference.

When a person purchases a property with a conventional mortgage, a Bank lends them the money and then charges interest on that loan. Al Rayan Bank HPPs are different; we purchase the property in partnership with our customers with each party owning a share. The customer then buys our stake in the property over time, paying rent on the portion that they do not yet own. At the end of the agreement, the customer owns the property outright- without ever paying interest.

Islamic banks use conventional indices such as the Bank of England Base Rate (BBR) to price their products as these are most accurate, widely accepted and consistent benchmarks for financing. This allows Islamic banks to meet the important Sharia criteria of ensuring consistency and avoiding uncertainty.

The alternative would be to use local rental rates, however this would create too much variation as rental rates fluctuate depending on a number of factors, such as the condition of the property or proximity to a good school. Consequently, we would not be able to offer a fair and consistent rental rate across the country. Not only is this prohibited in Sharia but it would also be costlier for the customer.

The use of a well-recognised benchmark therefore allows us to offer better value for the customer by pricing products that are in line with the market.