Home Purchase Plans: An ethical alternative for customers seeking residential property finance
At Gatehouse Bank, we strongly believe in the importance of highlighting the various alternative finance options that are available to all customers, regardless of their faith, as consumers increasingly look to align their financial decisions with their personal values. According to our data, almost half (45%) of UK homebuyers would consider using an ethical finance provider that follows Islamic principles, indicating a real interest within the UK for these alternative options. Further data from Gatehouse Bank’s latest Islamic and Ethical Finance Report revealed that just under two fifths (37%) of UK homebuyers would be most attracted to Shariah-compliant providers because they do not invest in unethical sectors, such as alcohol, tobacco, adult entertainment, gambling and the arms industry.
Islamic home finance products explained
Shariah-compliant providers such as Gatehouse Bank provide an Islamic alternative to a mortgage. We offer a range of Home Purchase Plans (HPP) for homebuyers as well as a range of buy-to-let purchase plans for UK residents, UK expats and international landlords who wish to buy or refinance property.
Unlike conventional home finance products, Shariah-compliant products do not pay or charge interest. This is because Shariah principles state that money should not generate profit in and of itself but be put to work to produce a return for the benefit of the whole community. At Gatehouse Bank, this means that our customers’ funds are invested into asset-backed, real-economy activities, with the majority being placed back into the UK property market.
Whether for personal home ownership or buy-to-let investors, Islamic home finance products involve the customer and the bank forming a partnership to purchase the property together, with the customer then paying monthly acquisition payments and rent on the share of the property they do not yet own. Ultimately, the outcome is the same as with that of a conventional mortgage – once all payments have been made, full ownership of the property is transferred to the customer.
Raising awareness of Islamic finance options is key
Despite a promising growth trajectory for Islamic home finance products, there remain lingering misconceptions about who these products are for, which may be stopping some consumers from opting for them, despite their desire to make more ethical financial choices. Our research shows that, while there was an increased awareness of Islamic finance among UK consumers of the Muslim faith over the last five years, three in ten (30%) of UK consumers overall still believe that Islamic finance is exclusively for those of the Muslim faith.
For those working within the sector, greater choice of products goes hand in hand with a greater responsibility to ensure that both homebuyers and prospective landlords are fully aware of the breadth of new and emerging options available to them. This will allow them to make the right choice as to how to access the financing they need. At Gatehouse Bank, we remain committed to providing products for everyone and helping to raise awareness of alternative finance options as we move into what we hope to be a prosperous and stable year ahead for the UK home finance market.
