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Al Rayan Review (Islamic Mortgage): The Definitive Guide

We have written extensively on Islamic mortgages at IFG (see here, here and here for example and definitely also check out our cool Islamic mortgage comparison tool), but we have previously kept the discussion generic. In this article, for the first time ever, we exhaustively go through Al Rayan’s Home Purchase Plan ( the “HPP”) in particular.

We are confident that nothing as detailed as this has been done for the Al Rayan HPP. In this article we examine the legal, Islamic, commercial and practical aspects of the HPP informed by:

  1. a close read of Al Rayan’s legal documentation;
  2. a wide-ranging survey of Al Rayan customers; and
  3. hundreds of discussions we’ve had with professionals, Al Rayan staff and scholars over the last few years. In short, this has been a time-intensive exercise for us, but inshAllah it is the best resource out there for Muslims wanting to properly understand the Al Rayan mortgage both Islamically and commercially.


Yes, we’re starting with a summary (there’s nothing worse than trawling through 4,000 words to find a one-paragraph summary tucked away!).

Our conclusion is that, given the current UK context, the HPP is the best Islamic mortgage option out there for those who qualify under the Al Rayan eligibility criteria. However we do have some bones to pick on both the commercial and Islamic side with the HPP as it currently is. We believe the HPP could be better from both a commercial and Islamic perspective if a few tweaks were made to it. We hope this article will help pave the way to making these changes.

From our personal perspectives, Ibrahim has an Al Rayan mortgage, while Mohsin has opted for Heylo Housing (but plans to shift to Al Rayan in the coming years). You should definitely also check our our Islamic mortgage comparison page. It is the only one of its kind in the UK.

Islamic & Legal Analysis

What is the structure being used here?

The Al Rayan Islamic mortgage is structured as a Home Purchase Plan. This is a regulatory structure that was specifically created through legislation to assist the Islamic finance industry in being able to provide an Islamic alternative to mainstream mortgages.

For a product to be a legal HPP structure, the bank must hold the buyer’s beneficial interest on trust to be delivered over to the buyer once he has paid off the amount necessary to buy the full interest in the property. At this point the buyer will be transferred over the legal title and will hold complete legal and beneficial interest in the property.

“Hang on, what’s all this beneficial v legal gobbledygook?” you might be saying.

Simply put, a legal owner of a property is the “formal” owner of the property, i.e. the one whose name is on the freehold title at the Land Registry. A beneficial owner is someone who has the right to enjoy or benefit from the property, and this can include the right to any income from the property or to reside in the property.

To complicate matters further, an interest in a house can be a freehold or a leasehold. A leasehold interest is different from a freehold in that it is necessarily time-restricted. A leasehold could be for a few days, or many hundreds of years, but eventually it will expire. When it does expire, the freehold owner will be able to step in and take possession of the property.

The Al Rayan HPP uses a combination of freehold and leasehold to deliver a diminishing musharakah/ijarah model (N.B. that musharakah means “partnership” and “ijarah” means rent). This Islamic finance model goes thus: the buyer of the property slowly buys more and more of the house over time, and his rental payment on the amount he does not own slowly decreases at the same proportion. Eventually he owns the entire house and is no longer paying any rent.

This is a little diagram of how the whole thing works:

So the situation is that the Buyer wants to buy the House, but he doesn’t have enough money to buy outright. But he does have enough for a 25% deposit. So he approaches Al Rayan bank – and this is what happens:

Al Rayan ownership structure post-completion

Al Rayan buys the freehold title in the house at the closing of the transaction, and it is its name that appears on the title. But the buyer gets an equitable interest in the freehold by way of the contract (the DCA – more on that below) and also gets a leasehold for 99 years alongside Al Rayan. This leasehold can only be sold or ended by the consent of Al Rayan, but it does put the buyer on a more secure and long-term footing than a shorter lease would.

Time passes, the Buyer continues paying rent and buying further equity in the House until eventually he owns 100%.

At this point the Bank transfers over the freehold interest in the property to the Buyer, the leasehold ends, and all charges in favour of the Bank are removed from the charges register.

HMRC is thankfully agreeable to only charging Stamp Duty Land Tax (“SDLT”) once, and so SDLT is only payable upon the initial purchase of the house, and not on the final transfer of the freehold by the bank.

Incidentally, this is one area where Al Rayan has an advantage over Heylo.

Which scholars approve and disapprove of the Al Rayan HPP?

Shaykh Haitham Al-HaddadThe Al Rayan HPP is not Islamic; it is too much like a debt instrument (i.e. the buyer is locked into purchasing the entire finance amount back from Al Rayan from day one).
Shaykh Akram NadwiGet a conventional mortgage if necessary, as Islamic finance is just like conventional finance dressed up in a religious garb.
Shaykh Suhaib Hasan(at least in particular cases): get a conventional mortgage if necessary.
Shaykh Abu EesaThe Al Rayan HPP is fine
Sheikh Dr Abdul Sattar Abu GhuddahThe Al Rayan HPP is fine
Sheikh Nizam Muhammed Saleh YaqoobiThe Al Rayan HPP is fine
Mufti Abdul Qadir BarkatullaThe Al Rayan HPP is fine
Sheikh Muhammad Taqi UsmaniThe Al Rayan HPP is fine (though we note he is retired from the Al Rayan Shariah Supervisory Committee)

Are there any issues?


An Islamic mortgage necessarily needs to be substantively different from a conventional mortgage. It can’t just be cosmetic changes. We are told that the HPP is substantively different from a conventional mortgage in a number of ways, primary among them the fact that the bank takes on a different set of risks to that taken on by a conventional provider. Let’s take a closer look at some of the key risks at play here. 

No.RiskIFG CommentaryRisk borne by
1House damaged or made defective by an insured riskThis liability has been excluded pursuant to clause 9.2(a) of the DCA.Insurer
2House damaged or made defective by an uninsured riskThis liability has been excluded pursuant to clause 9.2(a) of the DCABuyer
3Cessation of rent payments if a house gets destroyed/uninhabitableThis liability has not been excluded. Al Rayan is on the hook for thisAl Rayan
4Insurance money not being enough to cover damages and/or exceed the maximum finance-to-value ratioThe bank has got the right to not rebuild the property but to simply sell the property further to clause 6.1 of the DCABuyer
5The buyer doesn't insure the propertyThe bank has got an indemnity from the buyer in clause 7 of the Service Agreement which means the buyer paysBuyer
6Bank has to get work done to the property and damage is caused by its employees or agents to the property in the processThe bank has excluded this liability in clause 12 of the Lease AgreementBuyer
7The value of the property decreasingAl Rayan simply won’t sell at below market value – or to the extent you would like to, then you need to pay off the remaining amounts due with Al Rayan receiving the acquisition payment they made initiallyBuyer

As you can see, Al Rayan has effectively hedged the risk in respect of all but one risk (Risk 3). We do not think that Al Rayan needs to be exposed to all of these risks, and we do think that insuring away the risks is an effective and acceptable strategy, but we do make the following recommendations to improve the risk exposure split between parties:

  1. Al Rayan should purchase the insurance for each of its properties. It should purchase a global insurance policy and, if it really wants to, pass on the cost through a slight increase in its global profit margin. But the fact that insurance is used to hedge so much of the bank’s risk, and is also bought by the buyer seems unfair and sends the wrong message to the customer. 
  2. Al Rayan’s insurance will presumably be broad and cover a wide array of risks that would lead to damage or defect to the property. Accordingly it should bear Risk 2. Given the vanishingly small risk of a property being damaged by a risk that is not insured, this is not a big ask. The thinking behind this recommendation is that fundamentally any damage or defect to the property is the bank’s responsibility (or at least its share of the property). It is fine that the bank has sought to insure away this liability the best it can – but then the little bit it hypothetically hasn’t been able to insure away, it shouldn’t just transfer that back to the buyer. It’s not the buyer’s fault that the insurance coverage bought isn’t broad enough.
  3. Al Rayan should consider buying insurance to cover the potential shortfall in Risk 4.  

No sharing in upside or downside risk

We don’t think this is ultimately a really substantive issue. See our reasoning in this article and this article. 

Too much like a debt instrument

This is a sensible concern. We discuss this in the “Why do we think it is acceptable” section below. Ultimately we conclude that, given where we are right now in the Islamic finance industry’s development and the size of the Muslim population, Al Rayan’s model is acceptable. However, we are very much keen to see progression and Al Rayan and others evolving their models as the Muslim community grows and as the gains in infrastructure, tech and regulation allows banks a bit more breathing space. 

What are the other options?

OptionSharia-CompliantIFG Commentary
Renting✔️Not a long-term solution for most people
Conventional MortgageWe are strongly of the view that this is not acceptable, though we understand some scholars allow this option
Gatehouse/Al-Ahli/UBL ✔️ (though we have not yet reviewed in detail)These banks are challengers to Al Rayan and offer rates that are a bit more expensive – but that might change as the competition hots up!
Strideup✔️ (though we have not yet reviewed in detail)This is not yet live in its latest iteration but will be a HPP model too.
Heylo Housing✔️ (though we have not yet reviewed in detail)More expensive than Al Rayan but generally quite user-friendly as far as we can tell
Shared Ownership Schemes Some of them – though some aren’t, and some need a bit of negotiation and restructuring to get there, depending on how lenient the scheme provider is to this sort of thing These are great when sharia-compliant, but often tend to have haram components built in. We have heard of examples where schemes do let Muslims tweak the terms a bit so they can buy a house though. They are also restricted to set properties – often new-builds though (which are often slightly overpriced)
Primary Finance✔️This is a young start-up and will only be able to finance a handful of home purchases unless it gets hold of some deep liquidity (we hope they do!)

Why do we think the Al Rayan HPP is acceptable?

At IFG we consider the HPP product Al Rayan is offering to be permissible and the best Islamic mortgage product available right now.  

The HPP is not a perfect model and an arguably more Islamic model is something like what Primary Finance are trying to implement or Heylo Housing and other shared-equity schemes offer. This is because these schemes genuinely let you choose to not buy back your home and simply rent for periods.  

However these schemes are either (a) just starting out and not well-funded or widespread enough to be a genuine solution for the vast majority of Muslims right now (Primary Finance); or (b) more expensive than Al Rayan and conventional providers (Heylo Housing, Primary Finance and other shared equity schemes) and so hard to seriously scale up. 

A genuine solution for British Muslims needs to have scale and liquidity sufficient to meet the demand for Islamic mortgages and at the same time be affordable. But that means having to set up a proper regulated bank, raising necessary liquidity, and adhering to tight regulatory and liquidity rules. All this costs money, and means that such a bank needs to be able to package up its Islamic mortgage product in such a way as to effectively minimize risk for itself as much as possible and mimic the debt-like characteristics of mainstream mortgage providers. 

Enter Al Rayan. 

So why exactly is Al Rayan more expensive?

Well, the cost of financing is generally higher for Islamic banks (as they can’t borrow from the Bank of England (yet) or the mainstream money markets at low interest rates). They have to get their money from savings accounts and sukuk offerings, and this is more expensive because people with savings account or holding sukuks want to get paid. Additionally there’s the whole other issue that Muslims in the UK constitute about 5% of the population, and only a subset of them actually care enough to use Islamic mortgages. So Al Rayan’s target audience is (relatively speaking) tiny, and accordingly its prices won’t benefit from the economies of scale that larger lenders benefit from and reflect in their pricing.  

A couple of points to wrap up the Islamic and legal analysis though. 

Firstly, if a solution like Primary Finance gains traction and gets hold of the necessary liquidity sufficient to reduce its prices to be around Al Rayan’s and to meet the demand, we would prefer it to Al Rayan. But that’s genuinely a big “if”. People like Strideup have tried and failed and have had to pivot to a HPP model. 

Secondly, Al Rayan (and other Islamic banks) have now reached an agreement with the Bank of England to be able to get access to sharia-compliant liquidity. This should in theory reduce the cost of capital to the bank, and therefore lead to a reduced rate being charged to customers. This should give a little more breathing room to the banks to be able to implement some of the risk allocation measures we recommend above, as well as passing the saving down to customers. We will be watching this market closely and fighting for the Muslim retailer to the best of our ability.

Commercial Analysis

One of the key frustrations with Islamic mortgages is that they’re more expensive than their mainstream counterparts. For many, this is in fact the driver for them to go with a conventional mortgage. We’ve explained the economics behind why this is the case above.

In short, we think being driven by price is the wrong approach to take from an Islamic point of view. After all, if you accept that mainstream mortgages are haram, then you’re comparing apples and oranges because you shouldn’t be going for the haram product anyway. It’s a bit like saying that you’ll go for the haram meat at Tesco because the halal butcher is too expensive. 

That being said, it is still useful to look at the conventional mortgage market and see where Al Rayan fit in from a pricing perspective.

How does Al Rayan compare against mainstream mortgage providers? 

Let’s take an example of someone who is buying a house for £250,000 and has a 10% deposit (in other words, they’re going for a 90% LTV mortgage. LTV stands for “loan-to value” ratio, and is simply a figure to express what percentage the loan is in comparison to the property being bought).

They choose a mortgage term of 30 years. We’ll look at 4 major high-street banks and see how Al Rayan fares against them. Note: these figures are accurate as at July 2019. 

BankMonthly PaymentInitial RateLender Fees
Al Rayan£1138.714.49%£999

Clearly, Al Rayan is much more expensive than a conventional lender. Around 30-40% more expensive. Or to put this in more concrete terms, you’d be paying over £300 extra per month in this example case, close to £4,000 a year. That’s a fancy holiday or, true to our ethos, you could invest that money and grow it. 

There’s little doubt that mainstream providers are cheaper. We really want the main players to come back with sharia-compliant products. HSBC and Lloyds did used to offer them and the Muslim community missed a trick by not supporting these products.  

As it stands though, there are no mainstream banks offering halal mortgages.

Al Rayan versus other Islamic Banks

Let’s carry on using the same example of a 30-year mortgage term on a £250,000 house but change it to a 20% deposit (i.e. borrowing £200,000). The reason for this is that Al Rayan are the only Islamic bank offering a 10% deposit mortgage so it would be difficult to compare without changing the example deposit amount. 

BankMonthly PaymentRateApplication FeeEarly Repayment Charge
Al Rayan£891.403.44% (discounted variable (discount until 30/6/21. Thereafter reverts to standard variable which is 3.99% + base rate - I.e. 4.74%) £399
Gatehouse£863.84 3.19% (discounted fixed rate for 2 years. Thereafter reverts to standard variable rate which is currently 4.5%) £399

You should do a comparison for your own particular circumstances (deposit, length of term etc). Don’t forget to factor in that when the rate reverts to the variable rate, you will be exposed to a changing rate (usually pegged in some way to the Bank of England base rate). 

In this scenario and for this particular product, Gatehouse is coming out slightly cheaper. You can use our Islamic mortgage comparison tool to easily compare all your options in greater detail.

A side note: going for an 80% mortgage might seem like a no-brainer as it is cheaper, but sometimes a 90% mortgage might make more sense as you can then retain some cash to either (a) do up the house; or (b) invest it in something that will yield more returns than your house will over the same period. We’ll do a fuller article exploring this whole question soon.

Al Rayan versus Shared Ownership Models

If you’re not familiar with shared ownership then it’s basically a model whereby you own a certain amount (e.g. 10%), the same as with an Islamic mortgage. You also pay rent on the share that you don’t own (similar to an Islamic mortgage). But your rent does not pay down equity in the house. Nor do you have to buy any more equity in your house (though there is the option to do so which will, in turn, reduce your rental payments).

We will explore the commercial rationale behind going for shared ownership in a future article, but it can be useful if you cannot get an Islamic mortgage for whatever reason (or you don’t want to). 

Let’s look at how AR stacks up against a well-known shared ownership provider, Heylo Housing. We’ll use the 20% deposit example above – 20% down on a £250,000 house. 

LenderMonthly PaymentRateApplication FeeEarly Repayment Charge
Al Rayan£891.403.44% discounted variable (discounted until 30/6/21). Thereafter reverts to standard variable which is 3.99% + base rate - i.e. 4.74%) £399
Heylo Housing£8154.89% of the unpurchased share (in this case £200k). Increases every year though – see below. £1200 (freehold) / £1800 (leasehold)

On these sums, Heylo would work out slightly cheaper (even factoring in the much higher product fee). We have measured that by looking at the cost over the first 12 months (including product fee) which would be around £11,100 for AR and £10,980 with Heylo (if buying a freehold). But given that you aren’t buying any equity in your house with Heylo, the balance probably shifts in favour of Al Rayan on pricing alone. 

The other factor tipping the balance in favour of Al Rayan here is that Heylo increase their rent every year by 0.75% + RPI (I.e. inflation). For example, if RPI is 2.5%, then your rent would increase by 3.25% next year. In our example, that means going from £815 a month to £841.  

On balance, Al Rayan wins out as the cheaper product here over time. 

Al Rayan v Renting

You might choose to rent for all sorts of reasons. How does that choice compare with taking out a mortgage? Let’s use the example of a £250,000 house in Birmingham. For that sort of money, it looks like you can get a 3-bed semi.  

Doing a similar search for an equivalent rental property tells you that you can expect to pay something like £750-£900. 

Not dissimilar to what you would pay with an Islamic mortgage, but you have the inflexibility that comes with renting. On the plus side though, you would not be locking any money away into a deposit, nor would you have to pay for many standard household repairs (broken boilers etc). 

Choosing to rent is a very specific choice, but on economics alone, there isn’t a huge amount of difference on the face of it. Over the long term though, buying is usually the more economic choice. 

The Al Rayan Buying Process

So how does this all work practically? The typical Al Rayan process will look like this (taken from this official Al Rayan guide)  

  • Stage 1 – Eligibility
  • Stage 2 –  Application (anticipate 3 weeks)
  • Stage 3 – Offer and conveyancing (anticipate 9 weeks)
  • Stage 4 – Release of funds (anticipate 3 days)

It is worth expanding on a few components of this timeline. 


Conveyancing is just a fancy term for the legal bit of buying a house. You will instruct solicitors to deal with this for you, as will the bank for their part.

Solicitors are notorious for being slow and holding things up. This can be due to all sorts of reasons but from our own experience and having listened to respondents to our survey, you can get the conveyancing process done in as little as 3 months if everything lines up. The Al Rayan graphic says to account for 9 weeks for conveyancing but we think this is ambitious.  

The key here is to stay on top of your solicitors and chase them regularly. Buying a house is a bit like having a side job – you will definitely have to take time out of your day to stay on top of things. If you are an employee, it’s helpful if you have the flexibility to take and make calls during the day without it disrupting your work.

Alternatively, you may at the outset want to ask the solicitor if you can nominate another person who is authorised speak on your behalf. That way you can nominate someone who would be free to just chase the solicitors at regular intervals. 

Deal falling through

A sad reality is that some property deals will fall through (30% of them according to some stats). Circumstances changes, or you might be in a chain that collapses, or a whole host of other reasons can intervene. In these circumstances, it is useful to have home buyer protection insurance. This is an insurance that pays out any lost conveyancing, survey, and bank fees you might have already paid. Check out this link for more information on this. (Note, that we adopt the minority position that insurance is halal – see here)


Another key part of the process is the survey for the house. All banks require this and Al Rayan are no exception. There are two types of valuation: 1) Valuation report, 2) Homebuyer report. 

The valuation report is simply a report to assess the valuation of your future home. This is the minimum that the bank requires and the fee for this depends on the value of your home. To give you a rough idea, on a £250,000 house, you can expect to pay just over £300. 

A Homebuyer report incorporates a valuation, but also gives you much more detail. A surveyor will actually inspect the property and write a report outlining how different areas of the house rate. This flushes out any potential issues that you might not have known about or spotted when you looked around yourself (e.g. rising damp, dry rot timber etc). The cost of this again varies depending on the value of the property you are buying but on a £250,000 house, you can expect to pay just under £1,000. 

Note that cost of these figures is taken from Al Rayan as you have to go with their valuer. It would be nice if Al Rayan had some flexibility on this as I know that these reports can be obtained much cheaper. For instance, Heylo Housing allow you instruct any RICS-certified surveyor. This approach makes sense in our view.

ownership & legal status

Al Rayan is the owner of the property. In the background, it enters into a leasing agreement with you as the co-owner, wherein agree to pay rent on the portion of the house that you do not own. So in the example above, you are paying rent on the 79% of the property that you do not own. 

There is also a co-ownership agreement which says that Al Rayan agrees to sell you its share of the property for the amount of the finance that it provides. 

The bank will incorporate into your monthly rental payments a portion which goes towards acquiring some equity in the property. 

This all works from a legal perspective and the good thing here is that you are dealing with a relatively large, trusted organisation. 

You can sell the property at any time and if the value has gone up, you will benefit because you only have to settle the finance amount with Al Rayan. Subject to admin fees, you do not get penalised for settling your finance early which is always welcome. 

Customer Perception

We’re going to use 3 main limbs for this in order of the size of the dataset – 1) Trustpilot, 2) IFG’s own survey, 3) Our own direct experience. 


Al Rayan has an impressive 4/5 average rating based on 216 reviews. That’s a very good score indeed. 

Unfortunately, Trustpilot do not allow you to filter the reviews by product so some of those 216 reviews will be for other things like Al Rayan’s banking offering. That’s a real shame, but what we’ve done is manually gone through the 216 reviews and picked out a couple of key positive and negative reviews on the mortgage process specifically. 

Let’s look at the first negative Trustpilot review: 

Negative TrustPilot review 1

With the caveat that we don’t know the ins and outs of the case, this is a pretty damning review. We have anecdotally heard that Al Rayan’s checks can be quite cumbersome at times. In many ways, this is probably reflective of the fact that they are, relative to mainstream banks, small. They have to take fewer risks than bigger banks and that probably means greater checks. But it’s worth bearing this in mind when it comes to planning your timeline. 

Let’s take a look at another negative review: 

This complaint raises a few issues: 1) solicitor issues (remember what I said earlier about solicitor problems?) and 2) customer service. 

Legal issues can arise for all sorts of reasons and, generally speaking, although the delays might be there, things do usually get sorted. The problems that arise differ from property to property and we don’t know enough in this case to really dig deep. 

Slightly more concerning is the lack of customer service. From this review and others that we have gone through, it is clear that Al Rayan could do a much better job on the customer service side.  

On the plus side, Al Rayan take time to reply to every Trustpilot review and that suggests they listen. 

Positive reviews. 

72% of all Trustpilot reviews were 5*, so we weren’t short of positive reviews to pick up on. Again, let’s look at two. 

This looks like a very happy customer indeed. Someone who got his home purchase succesfully completed on time and without any issue. He is also a fan of the customer service. This is positive, and shows that Al Rayan do have the ability to deliver great customer service. 

This is another glowing review demonstrating the bank’s ability to manage the process really efficiently. 

IFG’s own survey findings

We reached out to Al Rayan customers from the IFG e-mail list to get their honest views on Al Rayan. Here at the highlights for some average scores for key questions we asked.

Q: If you were buying a house today, would you use AR again?
Average result: 6.3/10

Q: How likely are you to recommend AR to someone you know?
Average result: 6.2/10

Q: Thinking about customer service and support specifically, what rating would you give Al Rayan?
Average result: 3.1/10

Q: Now thinking overall, what rating would you give Al Rayan?
Average result: 2.9/10

Other interesting findings (and tips!) from our survey

We also asked some questions that weren’t just about numbers. Things like asking about what they wish they knew beforehand and what they’d get Al Rayan to change if they could.

Here’s a list of things people wish they knew beforehand:

  • “Extra unexpected costs (e.g. chancel insurance etc)”
  • “That they will have two separate deeds […] us as tenants (leasehold) and they are the owners”. IFG note: we’ve explained this in this article.
  • “How long it would take”.
  • “A formal document on the process of giving lump sums would have been useful.”
  • “They don’t allow the facility to pay extra amounts on fixed rates.”

These are some really useful tips if you are about to enter the process.

Our reader recommendations to make Al Rayan better

We asked our survey respondents to explain one thing that they would advise Al Rayan to change. Here are some of their thoughts:

  • Improve the customer service
  • Make the process faster
  • Try to be more sharia-compliant
  • More explanation of the difference in their offering (e.g. what makes it halal)
  • Clarity around the justification for their higher prices [IFG note: we have explained this in this article].
  • More empathy and flexibility – the process is currently too rigid especially with regard to suitability requirements.

Al Rayan would do well to take notice of these customer recommendations. Some things are hard (e.g. speed of process) but other things like communicating how they come to their pricing is a relatively easy thing to do. By the same token though, it is easy for customers to say that a bank should be more flexible, but given the high regulation of the industry, Al Rayan understandably adopts a cautious approach. There’s a balance here, as nobody wants Al Rayan to face regulatory pressure or be known as the Islamic bank that went wrong.

our person experience

Both of us have had experience of Al Rayan personally. Mohsin when he was in the homebuying process (but ultimately didn’t go with Al Rayan) and Ibrahim also during his homebuying process (still ongoing). We both know people in our circles who have taken our Al Rayan mortgages. 

Our direct experience was overall good. They have always been courteous and relatively swift in their communications and overall things have gone smoothly. 

One area we think they could improve on is their flexibility when it comes to the requirements. They have some very conservative requirements (based on their risk-averse approach) but having some degree of flexibility would be nice. However, we appreciate that a regulated bank has to have policies in place. 



Overall Conclusion

There is no getting away from the fact that Al Rayan is expensive. That is sadly the price we pay for participating in what is a small and relatively new market. Al Rayan’s costs are higher than a mainstream bank and we pay the price of that. Many people fail to recognise the challenge that Islamic banks have on this front but question furiously why they charge so much on their home purchase products. 

Ultimately, when all is said and done, this is a sharia-certified product that we are personally happy with too. Al Rayan have done a great job in this industry of bringing an Islamic home purchase product in the mainstream. They have built up a good brand and are a regulated bank that is well-respected. 

Like any product with any company, there are negative reviews and a few legal and shari’ quibbles. But we also see lots of happy customers too based on Trustpilot and our own survey. We hope that, as more people come to Al Rayan through IFG, we can together influence the overall Islamic mortgage market for the better inshAllah.

For those who are still uncomfortable on the sharia side we recommend checking out an alternative to a mortgage such as the one provided by Wayhome.

If you are buying a house and want to go with Al Rayan, we hope this review has helped!  Remember to check out the Islamic mortgage comparison page!

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37 Comments. Leave new

  • have you guys assessed the profit Rayyan bank is making? Your article suggests that the higher cost charged is because AR is facing higher costs which it passes to customers, ok at least that makes sense.

    but has this been validated in terms of profit margins AR making. If that is higher than conventional banks then AR is taking advantage of its monopolistic position?

    • Good question – this is something we will analyse as well, but from past conversations I’m pretty sure AR is not hugely profitable and in fact for many years ran at a loss.

    • They used to make big losses, up to 2014. They are now smashing it.
      At some point, probably not now, they need to start reducing the fees as they are so expensive!

      Am hoping Primary Finance can get to launch quickly.

  • Amazing work as I’m currently doing the same DD as buying my first house. Have you ever looked at gatehouse bank? Is that structured exactly the same and why would you choose AR over gatehouse?

  • I had a lot of issues with converting my existing mortgage to Al rayan on my first house. It took 13 months!
    However, it was much smoother for my 2nd house and when I signed up to the next product 2 year later they offered me a discount on the rate.
    We do need more competition in this sharia compliant sector to allow Al Rayan to up their game .

    • Ouch! 13 months doesn’t sound good at all. But it’s good to hear it went smoother the next time round and they sorted a discount out for you. Agreed – the more players we have in the market, the better it is for everyone.

  • My brother in law has been doing some research on AL Ryan bank but i think customer service bit has put him off taking home purchase plan of AL Ryan Bank.

    With all due respect, after reading the whole article it feels to me that you are trying to justify that Al Ryan mortgage is Halal. My be its just me but did enjoy it.

    I personally think that Muslim scholars who are specialize in Islamic finance should get together and review Al Ryan Home Plan so that most of the Muslims living in UK can benefit from it.

    • salaam Steve – yes that’s right – we do think its halal. We think it could improve though too!

      jzk khayr for the positive feedback!

  • ASA Brothers JAk on this amazing article .

    I live in the united states and i want to invest in Real estate in possibly crowdfunding organizations E.g Fundrise . Can you please give a in depth review on what to look for in these types of investments ? Im trying to find Halal investments as much as possible outside of me outright owning property and renting it out .

  • A very useful article MashAllah.
    Do you not think that we need to be a bit more realistic when it comes to price comparisons? the cost of equity will always, ordinarily, be higher than that of debt and if we genuinely expect Islamic Banking becomes more “Islamic” and take on more risk typically associated in a partnership agreement, they will have to be rewarded for taking that additional risk through higher returns?

    • Agreed. I think that’s a very fair point.

      The issue is Islamic banks create a debt-like product and charge higher-than-debt rates. Actually, a really really sharia-compliant option will be more expensive than an Islamic bank because, as you said, the counterparty would be taking on proper equity risk in the asset and would want to be remunerated for that.

      Muslims are quite bad though too. They want Al Rayan to be an equity-product but charge debt-rates. That’s just unfair – which you’re right to highlight.

  • Mohammed Faiyazuddin
    September 23, 2019 2:44 pm

    Assalamualaikum brother. Looking at the article and the Q&A’s, I gather that Al Rayan at the end is more expensive than the high street banks offering the conventional Mortgage. Does not this mean it defeats the purpose of ‘No Interest’ principles. As a lay man if I only look at numbers, I am will end up paying more to Al Rayan than the other High street banks. Does this not make Halal hard and Haram easy.

    • salaam Mohammed – There are reasons for Al Rayan being more expensive which I have explained in this and other articles. The biggest reason is that Al Rayan is taking an equity risk as opposed to a lending risk and so the price is commensurate to that.

  • JZK. A very good informative piece.You have tried to give a good explanation about changing from Conventional mortgage to HPP but I wanted to know if vice versa is possible (i,e: Can a person change from HPP to Conventional mortgage). Looking at the article it seems once a person is HPP client, he doesn’t seem to have any choice and is stuck for the lifetime with them (as people with conventional mortgage can change banks on remortgaging)

    • Good question! I don’t know the answer definitively, but would strongly assume that this is straightforwardly possible. Will check.

  • Abderrahman El-Ouantouti
    December 19, 2019 11:15 am

    Good morning.

    How come this is a sharia complaint mortgage but it is very and identical to a non Islamic mortgage, the hint here is why a person has to pay rent and also buy note equity from the bank? In my opinion it is identical to mortgage repayment + interest.

    They have basically change the wording to the terms of non Islamic mortgage and put some scholars certificate and made it as ” ismlamic mortgage”.

    I appreciate the article and the details that was presented but there is only one BIG FLAW with with this article which is, in what Islamic sharia rule ( quran and sunnah) says or prove that this Islamic mortgage is 100% Halal.

    As Muslims we must make sure that what we are doing is according to the quran and sunnah not by the words of scholars alone, we need evidence from the book of Allah the sunnah of our beloved prophet Muhammad peace be upon him.

    I suggest that you need to do more research about the application of this mortgage and apply it on quran and sunnah.

    Thank you

    • Omar Khoder
      July 2, 2020 6:37 pm

      Brother Abderrahman,
      Islamic mortgages are not identical to conventional mortgages just like a halal roasted chicken is not identical to an electrocuted roasted chicken; both chickens probably taste identical, but the processes are different, one process is in accordance with Quran & Sunnah while the other isn’t.

      You are comparing the end results, which is akin to comparing how the chickens taste like, not much different as I said. But the paperwork i.e. the process is different and this is how an Islamic mortgage becomes Islamic. I suggest you read again the section of the article related to the legal structure of the HPP. In simple terms, conventional mortgage is an interest bearing debt with the house securing the loan, no doubt this is haram. HPP are different, the bank has an equity stake in the house (essentially the bank is your partner), you pay the bank rent for its share and if you want, you pay some more to buy the bank’s share over time (difference between rent only and rent & acquisition). This is clearly much different than borrowing money and giving it back with interest, just like saying bismillah Allah Akbar, facing the qibla and slaughtering the chicken is different than electrocuting /choking the chicken and then slaughtering it.

      HPP can be fine tuned to be even more sharia compliant, but as it stands, it is free from riba, unlike conventional mortgages. Final remark is that according to Quran and Sunnah, the default in financial transactions is permissibility, only when you introduce the forbidden it becomes haram.

      I hope this clarified a bit more and hopefully you’ll consider an HPP when you buy/refinance your property.

      • Asalamualaikum. Jazak’Allahu Khairn for your reply. Do you consider the Buy-to-let products from ARB Shairia’h compliant as well?

  • I’m in the process of refinancing to ARB and they do have very serious customer service issues in my experience but if you see past that then you are ultimately getting peace of mind by staying away from riba. Allah knows best. Even if they had more competition it might be that any savings you make by switching finance provider would be eaten up by what seems a more complicated conveyancing process?

    • I’d encourage you to leave a Trustpilot review and/or speak to AR directly about customer service issues – that’s the only way that the right people get to know about it. We did find some disgruntled people in our own research too (but we did also find some very happy customers). You will have seen this within the article iA.

      Regarding competition, yes it may or may not be economical to switch to even a cheaper provider, but in the grand scheme of things, competition creates a healthier marketplace (at least certainly for new borrowers!).

  • Salams, just wanted to clarify something please. From what I’ve understood (which is probably very little!), Ar-Rayyan are the owners of the house up until full payment is made on it after which ownership transfers over to the customer.

    However, the customer is also “locked in” to buying the entire house from day one. So if I took out a HPP tomorrow, made 12 monthly payments and then died what would happen? Would I be legally responsible to pay off the entire debt from my will etc? Would the debt be transferred to my wife and family? If they couldn’t pay it, I guess I would lose the money which I had already invested but would I meet God with an unfulfilled debt on my minds as I agreed to pay the full amount to ar Rayyan at the beginning of the contract?

    • Ibrahim Khan
      April 20, 2020 9:48 am

      Good question.

      Typically an Islamic bank would see if your inheritors could take over the mortgage payments. If they cannot then, the house would be sold to pay off AR. The remainder would go to the inheritors.

  • It’s a very useful article and a genuine comparison, which helps as a seeker of some information on this topic, as I am looking forward to buy first house in uk.
    I need a small verification on the example comparison between conventional and ARB ,
    is the monthly rate going to be same? for the whole repayment period or is it going to decrease over the time?,as the buyers share is raising in Islamic HPP.
    if it is same, it’s going to be like 1138 x12 x 30= 409680?
    If it’s going to decrease over the time, could you please explain how much we are ending up paying at last?
    Jazakallah, may allah bless you and grant more knowledge in this matter

  • You mentioned that AR doesn’t get loans from the Bank of England (yet) and charges higher rates because it relies on savings accounts and sukuk offerings, so why does it peg its variable rate to BOE? Being somehow connected to the BOE makes it seem as though it deals with interest but uses other terms to describe it.

  • Ibrahim Abbass
    June 18, 2020 7:35 pm

    Doesn’t Al-Rayan participate in fractional reserve banking? When a conventional bank makes a loan, only a minority of that is drawn from their deposits. The rest is printed into existence from thin air. Isn’t Al Rauan creating new money every time it issues a loan?

  • Ibrahim Mzee
    June 26, 2020 3:04 pm

    Sir a m from TANZANIA seeking for a loan worth 150,000 $ to buy a home in my country

  • I notice that Mufti Taqi Usmani has given his approval to the Al-Rayan home purchase plan. Does his authentication still apply to the current HPP although he has retired from the Shariah board? Has there been any changes to the contract or terms and conditions since his approval?

    Also does Gatehouse follow the exact same shariah guidelines and principles as Al-Rayan?

  • Having had the HPP for more than 2 years, and other products with ARB, my conclusion is that when the process is running smoothly it’s fine; but when there’s a problem, ARB would easily win the award for the worst customer service and worst conflict resolution ever.

    Nearer to the completion, *nobody* would pick up the phone in their Sales “hotline”. Nobody over the phone would be accessible that would be able to comment on the conveyancing. They even recommended to proceed with the “exchange of contracts” without actually approving the ‘final report’ thus the finance.
    The solicitors they use SM LLP are awful – slow, incompetent and shirk any responsibility. In the words of my solicitors who felt he had to call them at certain points “to instils the fear of God in them” so they could proceed.
    They offer online access to the HPP account, but at one point due to an upgrade they locked me out of it for 3 months – 3 months. In their response to an official complaint, they said they were “satisfied” with what they had done, the response was final and that they would not respond to any more emails.

    It is worth noting the £200 admin fee that is payable every 2 years when changing products. That’s about £2,500 over the general course of a mortgage.

    I just hope that the whole process goes smoothly for the remaining 20 or so years.

  • Thank you, I have just been searching for info about this topic for ages and yours is the greatest I’ve discovered so far. But, what about the conclusion? Are you sure about the source?

  • Asalamualaikum. Is it permissible to get a Buy To Let property from Al Rayan bank? Jzk.

  • I’d like to hear more about Mohsin’s experience with Heylo, is there an article or review in the pipelines? I feel as if there is no definitive guide on purchasing via companies such as Heylo as they are relatively new so I would greatly appreciate if Mohsin could share his views/experience as you guys have mentioned how his purchase was with them.

    May Allah reward you!

  • Salaam,

    I want to do an ijarah only purchase for a BTL. Currently in the UK landlords do not get interest relief under section 24 for interest on mortgages. since islamic banks do not charge mortgage but rent would this be seen as an expence?

    Thanks i’m struggling to get a clear answer on this

  • ASA all,

    An excellent article by the IFG team and i suspect they know more about the HPP product than Ar-rayaans sales team 🙂

    on to my views. I have been with IBB/Al Rayaan for almost 10 years i hold a variable rate HPP that allows overpayments . Prior to this i was with Al Buraq.

    first things first, yes it is much more expensive than a conventional product, but then that’s like comparing a milk float to a Tesla – they are different products aimed at different markets. Do your research and make an informed choice. Ar-rayaan are business and I willingly made the choice to pay my hard earned money to Ar-rayaan for the privilege of buying a house in a halal way.

    i once attended a seminar and the head of Ahli United Bank was repeatedly asked why their HPP product was so expensive, with the audience being border line aggressive with him. Ultimately he stated “we are not a charity, we are a business. if you don’t like our product you have other options” – which is a very fair and valid observation.

    I think a lot of the negative reviews and concerns that many Muslims raise are based on the cost difference and also due to not reading the product literature or even reading the legal documents before signing them.

    For me, i knew full well going into Alburaq and IBB that the rental element was pegged to Libor for Alburaq and BofE base rate for Al Rayaan. I also knew of the intricacies of the freehold/leasehold structure as I read sample contracts beforehand. The service agency agreement is an oddity for me as the customer (i.e me) is agreeing to maintain the property for the term of the agreement for a sum of £1 which is not linked to reality. Also as pointed out in the article, you are not actually paid the £1, unless you issue a demand for it. Having said that, I consider the property to be mine, and as such, i fully expected to maintain it during the term of the contract at my own cost, so this is not really an issue for me.

    some have said that if you enter into the fixed term discount, you cannot make additional acquisition payments. Again, this is documented in the product literature and the bank do tell you that you cant make additional payments until your fixed term ends (Well, technically you can make payments, but your rent wont be reduced). This is the same as going into a fixed price energy deal for gas/electric. i’m sure Ar-rayaan would allow you break out of the deal and switch to their standard variable rate that does allow overpayments but you have to pay the exit penalty (i assume this would be the product switch fee of £200) and of course the risk of a variable rental rate if the base rate changes.

    Overall, I would recommend Ar-rayaan for their HPP product. Yes it is higher cost than a conventional mortgage, but then would you expect anything different? The bank is a business and they are offering a niche product.

    Over my 10 years I have only had one customer service issue with them which they resolved promptly.

    How could Ar-Rayaan improve?

    They do offer savings, ISA and fixed term deposit accounts. An offset product would be a good development whereby cash held in a Ar-rayaan savings account can be used to offset the rent, although i fully appreciate that this may not be sharia complaint but worth investigating. Maybe one fore the IFG team to look into.

    Note for IFG

    One item you did not address was what would happen in the event of insolvency of Ar-rayaan. The property portfolio is legally owned by Ar-rayaan so in theory in the event of liquidation of assets, the portfolio could be sold on. I have wondered if the DCA would provide enough protection to us as customers in this scenario.

  • just word of warning, i’ve done my HPP with AL rayan.
    The process has been significantly longer than any remortgage i have done, the lenders solicitors ask lots and lots of questions about the most minute of things and exect difinitive answers. I have lapsed my completion date due to their solicitors. I chose a solicitor who was on their panel to prevent any issues like this..but have been severly dissappointed + random extra charges added on to fees by banks lender for their own mistakes. InshaAllah i will complete soon. So hopefully there is some barakah for going halal. IFG have influenced me a lot to go down this route.


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