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UK Banks That Offer Islamic Mortgages / Halal Mortgages in 2021


This article is designed to give you all the essential info you need to get yourself an Islamic mortgage in the UK in 2021.

We have pooled our various industry conversations into one condensed article for you to make your life easier.

We look at the different types of halal mortgages available right now, who offers them (you’ll be surprised at just quite how many options there now are), and our thoughts on who to go for, and for what.

Also, if you’re actively looking to take out an Islamic mortgage you should use our nifty comparison page to quickly pinpoint the most suitable bank and mortgage product for your needs as well as our detailed guide downloadable here.

But first, a few preliminary questions:

Preliminary Question 1: What is an Islamic mortgage / halal mortgage?

We all know interest-bearing loans are prohibited under the sharia . Conventional mortgages are very much that. So how to get around that? Well, Islamic banks have come up with a product called the “Home Purchase Plan” or “HPP”. This allows Muslims to buy a house without taking out an interest-bearing loan.

The HPP allows you to buy a property in partnership with the Islamic bank, paying rent each month on the portion you don’t own. You are slowly also increasing your stake in the house. In other words, the Islamic bank replaces the “interest” component with “rent”.

In principle this is fine from an Islamic law perspective. But only as long as the risk profile of the transaction is actually equivalent to the Islamic bank “renting” as opposed to “loaning”.

We have gone into this issue in exhaustive detail in our detailed review of Al Rayan Bank’s HPP here and our review of Gatehouse here. In a nutshell though, our considered view is that HPPs are halal.

Preliminary Question 2: Are Islamic banks riskier than a conventional bank?

Not really. Islamic banks are fully regulated by the Financial Conduct Authority and the Prudential Regulatory Authority and so have to meet their stringent criteria. Additionally, the Financial Services Compensation Scheme (“FSCS) applies to Islamic banks as well. So £85,000 of your money in a savings/current account with an Islamic bank will be secured by the FSCS in case the bank collapses.

In fact, Islamic banks are arguably safer than mainstream banks as they don’t engage in prohibited activities under the sharia, such as derivatives and exotic instruments trading.

Consequently, a large percentage of Islamic bank customers are actually non-Muslims who are looking to take advantage of either: (i) the market-leading savings rates offered by such Islamic banks; or (ii) take out a HPP where there is no penalty for early repayment.

Different Types of Islamic Mortgage Available in the UK

  • Diminishing Musharaka Islamic mortgage

The diminishing musharakah structure is the most common structure in the UK and if you’re getting a HPP you’ll almost certainly be using this structure. Under this structure, the purchaser and Islamic bank will be purchasing the property jointly. The purchaser then slowly buys the property back from the bank by paying rent on the bank’s portion, as explained above.

The purchaser will need to put down a deposit at the time of purchase however. The lowest deposit available in the market right now is 5%, but if you want to avoid paying hefty rental fees you should aim to have at least 20%. You can see all the UK Islamic mortgage products available today on our comparison page.

  • Ijara Islamic mortgage

The ijara mortgage is basically the diminishing musharakah, apart from there is no “diminishing” going on. So let’s say you buy a house for £100,000, and pay £20,000 as a deposit and £80,000 is contributed by the bank. Under an ijarah or “rent-only” mortgage, you pay the monthly rent each month on the bank’s portion of the house, but you don’t make any payments towards buying the bank’s portion.

This sort of mortgage is typically not advisable for a home purchase where you plan to live, as it can mean you having to end up selling your house at the end of the term in order to pay the bank back its £80,000.

However, this type of mortgage is often seen in a buy-to-let context, as there, sometimes people are looking to generate as much monthly cash flow as possible, and don’t particularly care about actually owning more of the property.

  • Murabaha Islamic mortgage

Under a murabaha structure, the Islamic bank will purchase a property on your behalf, and then sell you the same property at a marked up price.

So you go the Islamic bank and say “I want this property worth £100,000.” The bank agrees, appoints you as its agent, and you go off and buy the property for the bank. The bank now owns the property.

The bank now sells you this property for £125,000, payable over 20 years, and you now own the property (subject to you keeping up with your payments).

In Britain, the murabaha structure is sometimes seen in a buy-to-let scenario, in commercial property development financings, and in bridge financing situations. It is not typically seen for a residential Islamic mortgage. However, it is much more common in the Middle East and Far East. From a sharia perspective, the majority of scholars both from the Middle East and Far East are comfortable with this structure.

A murabaha structure is not to be confused with a commodity murabaha structure (also known as tawarruq). At IFG, we prefer other structures ahead of a commodity murabaha structure, due to sharia compliance concerns. You can find out more about that structure and why we’re not that keen on it here.

Which Banks Do Not offer Halal Mortgages?

Before we list the Islamic banks that do offer Islamic mortgages today, it’s important to clear up a bit of confusion on banks who have previously dabbled with Islamic finance. Contrary to what this article has to say, the following banks are NOT currently offering Islamic mortgages:

  1. HSBC

HSBC is the biggest UK bank, and at one point it branched out into Islamic finance under its Amanah Finance brand. However, this is no longer running, and HSBC has not been in the market to issue Islamic mortgages for a number of years now. Any information to the contrary is false.

  1. Lloyds

Lloyds used to offer Islamic mortgages and Islamic current accounts. Sadly they binned the Islamic current account in 2018. They also removed Islamic mortgages from their offering in the more distant past.

  1. Al Buraq Finance

Arab Banking Corporation used to offer Islamic mortgages in collaboration with Bristol & West under the “Al Buraq” name. However they have not been offering Islamic mortgages for a number of years now.

Which Banks offer Islamic Mortgages in the UK in 2021?

  1. Al Rayan Bank (formerly Islamic Bank of Britain)

Al Rayan Bank are the largest and oldest Islamic bank. They have the widest range of Islamic mortgage products in the market, and are well capitalized. That last bit is important – because sometimes banks say they are ready to give out mortgages, but don’t in reality have sufficient money to do that at any great scale. Al Rayan do.

Al Rayan are the go-to bank when it comes to 95/90% LTV Islamic mortgages and are also shortly about to launch a commercial development product as well. On average, they are a little bit more relaxed in their underwriting than Gatehouse.

Check out our detailed review of our detailed review of Al Rayan Bank’s HPP here.

  1. Gatehouse

Gatehouse was established in 2007 but has only recently started offering retail HPPs and Buy-to-Lets. It is looking to quickly grow in this market and has aggressively undercut Al Rayan on some of the key HPP products (e.g. the 80% LTV Islamic mortgage).

This competition is only good for the Muslim consumer and we expect customer care standards and pricing to improve as a result.

Check out our detailed review of Gatehouse here. For a detailed comparison of Islamic mortgage rates, check out our comparison page.

  1. Al Ahli

Ahli are the UK arm of NCB, the second largest banking group in the Middle East. They have offered HPPs for a number of years, though their usual clientele are those looking to buy larger, more expensive properties, generally in the London area.

So their products are not suitable for most, but where they do become suitable (for example a 65% LTV mortgage in London where you’re looking to borrow over £250,000), they often have great rates. So for someone who already has an Islamic mortgage and wants to refinance, Ahli might be worth a closer look.

  1. Heylo Housing

Heylo Housing is an alternative to a mortgage. It provides a shared-ownership model where you can buy back as much (or as little) of your house as you like.

Generally they are most suitable for those who are otherwise struggling to get an Islamic mortgage with a mainstream Islamic bank – because Heylo’s rates tend to be more expensive and not worth it if you can go for an Islamic bank instead.

From a shari’ perspective they’re great, as they don’t lock you into buying back the Heylo portion of the house, and as such there isn’t a “debt-like” element to the structure like there arguably is with a standard HPP.

Which Banks/Companies are shortly going to offer Islamic mortgages?

  1. Stride up

We have followed Strideup for a number of years and are pleased to see the progress they’ve made over the years. They are currently developing the next phase of their product and we expect them to be offering HPPs by mid-2020.

  1. Wayhome

Wayhome, formerly Unmortgage are another alternative to a mortgage, providing a shared-ownership model. They’re well-funded like Heylo and we’re excited to see what they come up with when they finally launch.

  1. Primary Finance

Primary Finance is a start-up that is still going through the FCA regulatory process. We’re very excited about them – provided they secure the financing they need to be able to execute on their vision. Check out our podcast with them here. In a nutshell, they to are an alternative to a mortgage and provide a shared ownership structure – but they believe that they can offer such a structure at Islamic bank (or lower) rates. Big aims – but if they achieve it, I’ll be switching for sure!

  1. UBL

UBL offer Islamic mortgages – at least that’s what their website says. But from the multiple times we have called them, we have either not got through, or the person we have spoken to has very little idea about their products. We understand from industry conversations that they’re ironing out a few regulatory issues in the background.

We hope they get everything sorted and do come to market properly soon!

  1. Habib Bank

Habib Bank is a household name across Pakistan, and they do significant business in the UK too. From industry conversations we understand that they too will be shortly launching their Islamic mortgage products. We look forward to them joining the market!

There are in fact a few more Islamic banks/companies that may or may not be coming to market soon to offer Islamic mortgages, but because they’re currently at a very embryonic stage, we reserve mention of them until they progress a little on their journey.

Should you rent instead?

People often think that buying is the most sensible financial decision. But, in some cases, renting can make better financial sense and give you the flexibility to move (for your job etc) quickly.

Something most people don’t think about is what would happen over the long term if, instead of using your saved-up deposit towards your house, you actually invested it and made a return on it.

We’ve made a nifty calculator that lets you plug in the numbers to work this out for you. Check it out here.

Final Thoughts

The Islamic mortgage space is set to hot up significantly in the coming months and years and we expect that this will improve customer service, pricing, and availability across the board. That can only be a good thing. Additionally, through our analysis and commentary on the sharia status of each of these Islamic banks’ products, we hope we can influence the market towards products that are halal both in form and in spirit.

Please do subscribe to IFG – every new subscriber gives more weight to our mission to do this.

Finally, you can quickly compare Islamic mortgages here.


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44 Comments. Leave new

  • Alhumdulillah,
    This is the best contribution of our Islamic umma.Specially for us who live in uk.
    Jazak Allah khair.

  • Salaam guys, any banks which offer murabaha products or is this just a concept?

    • Salaam – all UK Islamic mortgage providers currently don’t use the murabaha product.

      I understand that on buy-to-let mortgages these banks do use murabaha sometimes though.

  • Any Islamic banks or institutions that provide financing for right to buy?

  • Assalamu-Alaikum,

    I must say that after 3 years of looking and reading I’ve found this website to be the most resourceful and informative.

    I am all for promoting Islamic Banks. I have an current account and savings account with them. However my predicament is this.

    My wife has Right to Buy on the council flat that we live in. I have approached all the islamic banks for a Halal Mortgage but they have all been unable to accommodate me.

    I don’t even mind paying more in the long run as long as the mortgage is Halal.

    Al Rayan, GateHouse, UBLUK and Ahli…. None of them provide halal home finance for right to buy properties.

    So in this situation what are my choices ? If HALAL mortgages is not available for me.

    Is a conventional mortgage permissible for me ?

    For now we intend to buy this 1 bedroom council flat to live in ourselves but will want to move to a bigger house in the future and rent this out or sell it.

    I hope you can help me find a halal solution as we’ve been struggling for the last 3 years to raise a deposit amount and further funds for the shortfall and now discover that none of the HALAL BANK can provide a mortgage for us.

    Hope to hear from you soon.

    Jazakallah Khair

  • Salam mu alikum,

    I agree with the previous comments that this is the most resourceful source on the internet.

    I am looking at shared ownership i.e owning 25% and govt 75%. From your knowledge, do you know of any Islamic mortgage providers for the 25% I look to own?


  • Assalamu alaikum,

    Can you direct me to any home purchase plan brokers in the UK ?

  • Please Can you advise , is it possible to convert my conventional mortgage to an Islamic one ?

    • Certainly – if you go through our halal mortgage comparison and select remortgage, you’ll be able to chat directly to the bank who can help you.

  • As samlu Alikum

    Very useful website indeed, can you kindly advise if there are any islamic lenders/mortgages that support purchase of a council home

    Thank you

  • Salam,

    I was wondering if you could advise me please. I currently have my own mortgage and my mother is in a rental house and it will be the 10th time she has been served notice to leave the property in 19 years. She had never caused any issues or problems and has never delayed paying her rent however, these landlords, serve her notice and sell their property or rent it out at higher prices.

    I have been saving up to buy her a place of her own In Sha Allah. But if I get it through normal banks, I would need 20-25% deposit which I can’t afford at the moment.

    I was wondering what would be the best way to get her a place of her own, she has some health conditions and everytime she moves it really stresses her out and I just don’t know how else I could help my mother.

    Hope to hear from you soon.

    • Definitely worth posting in our forum ( and our muftis can opine!

  • Salam brother I like to buy a house but I need Islamic mortgage how much deposit I need to pay if it is 150.000 to 170.000 please let me know

  • As-salamu alaykum,

    I hope you are both well.

    I was wondering whether you know if the HPP products you’ve mentioned are compatible with say government help-to-buy schemes (the equity loan ones that provide up-to 20% for a newly built home)?


  • Salaam all! I have a question – me and my wife are planning on buying a Buy-To-Let property in the next year or two, and I was wondering about whether it would make sense to set up a LTD company and buying on that name. I know it would preserve out first-time buyer status for when/if we decide to buy our own personal house, and I hear there are numerous tax benefits.

    Obviously I would consult a tax adviser and Islamic mortgage broker before going through with anything, but what would you suggest? Is it worth setting up a Ltd company or not?

    • This question is not that simple to answer. It really depends on many factors, your objectives for purchasing a BTL, how long you want to hold it for, your residency and domicile, your family size and more! Once someone has all this information and more they can properly advise.

    • You don’t lose first time buyer status if bought in Ltd Co.
      You can clarify with solicitor and accountant

  • Salam,

    I’m looking to buy a house and then to sell for a profit using a halal mortgage (after fixing, improving etc) so could you please advise;

    1. What type of mortgage would suit this?

    2. What bank/broker could help this type of scenario?

    3. If I can secure this, is it perhaps better to speak to an advisor directly? For example someone in Al Ryan Bank?

    I thank you in advance for your guidance. Jazakallah

  • AssalamuAlikum brother i have mortgage with LloydsBank 2 years 2 month £ 130.000
    Can you possible to pay up of Islamic mortgage i can pay you
    My number is 07503051707

  • Muhammad Ibrahim
    July 8, 2020 12:19 am

    salam i put about 40000 to 50000 deposit how much after give me mortgage….

  • Salam brother can u plz advice me which Islamic bank do remortgage…I have mortgage with al rayan currently but wants to remortgage my house..
    Plz kindly give me some idea.

  • Sallam all

    Does any bank currently provide the ability to provide finance for building a new home in a halal way? I.e. an Islamic self build mortgage? If so, any advice as to who are best at this?

  • Salaam Alaikum.

    I am actually from the netherlands, looking for halal mortgages. Do you happen to know whether or not the mentioned banks provide halal mortgages outside the UK? That would really be fantastic!

    Looking forward to hearing from you and I thank you in advance for your reply,


  • Very useful website indeed, can you kindly advise if there are any islamic lenders/mortgages that support purchase of a council home

    Thank you

  • Mr Abdullah AS Patel
    November 7, 2020 6:42 pm

    Asw brothers
    I’ve been advised to check and it seems like if I have enough family members to help me keep my savings account propped up, this would be a halal option? Your guidance would be appreciated

  • Salams,

    I was looking to buy a boat house but traditional mortgage lender doesn’t apply. I have to use marine mortgage. Is there any Islamic banks that facilities the purchase of boat houses in London ?

    Thank you!

  • Assalamualaikum. I am looking at obtaining a shared ownership property however have found the list of possible halal mortgage providers do not offer their lending on such properties. I was wondering whether the fact a 3rd party still owns a portion of the property hinders the ability to make the lending aspect provided by the bank, halal and therefore is the reason why halal alternatives are non-existent. I would appreciate your expert opinions as i will write off this option should it be impossible for a lender to make halal.


  • Asalaamulaykum,

    Thanks for the great information, would you have any further reading on islamic finance for commercial property development.


  • Salamu Alaikum.
    Please I need an urgent answer
    1. Please I need a comprehensive notes on Islamic Bank product called SUKUK. I am Muslim in Nigeria, some other religions are misleading our people concerning Islamic bond known as SUKUK.
    2. Please, what is the difference between Islamic banking and conventional banks in terms of borrowing of loans?
    3. Is Islamic banking offers fixed deposit account and savings account.
    Thank you.
    Jazzakumullah Khairan.

  • Thank you for the article.
    You have not commented on crowdtolive bank/ website which offers a shared ownership model where one can rent the property and buy back ‘shares’ to ultimately own the house.
    Any thoughts?

  • Has anyone come across Crowdtolive before, they seem to offer a similar proposition to heylo housing, anyone got any experience with them?

  • I was looking for years for halal mortgage is any bank or lender name that given islamic halal mortgage or what should we do not buy home

  • Asslam o Alaikum Brother, Could you please provide detail review on Primary-Finance? They have started offering mortgages to those who have contributed in their loan scheme.

  • Assalamu alaykum brother any news about council house to buy through Islamic bank

  • We have trained brokers who can offer initial free advice on Islamic finance, but do charge a fee to prepare the application. We only help property investors and don’t offer advice on domestic properties (where you live)

  • Assalamu alaikum, this is really useful so jzk! Are there any Islamic mortgages for buy to let for multiple occupants? I’m struggling to find any at the moment.

  • What are the price range when buying a house with Islamic banks which offers halal mortgage.

  • Ishrat Bashir
    May 7, 2021 4:56 am

    Assalamu aliakum,
    I have been waiting 5 or 6 years for a halal mortgage option for a right to buy property. Unfortunately I still can’t find one. Can someone please advise me on my options.
    JazakAllahu khair


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