Islamic FinancePodcast

E7 Podcast: Islamic Mortgages – Are They Islamic?

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In this episode, we’re addressing the age-old question of Islamic mortgages. Are they actually Islamic or should you just go for a conventional mortgage?

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2 Comments. Leave new

  • Salaams.

    Really glad I stumbled across this page as I’ve been keen on discussing the intricacies of Sharia compliant mortgages or “home purchase plans” and this has done a great deal in helping me understand it better, Jazakallahkhair. One thing however I struggle to grasp the concept of on Al-Rayan’s website is:

    “The Bank reserves the right to change the margin on its products however a cap applies of 2%
    Therefore Al Rayan Bank cannot increase the margin on its HPP products by more than 2% ”

    As put in your recent articles, the profit/rental rate % mimicking the conventional interest rate % shouldn’t be seen as an issue because Islamic banks are only benchmarking themselves in a market far bigger than it’s own establishment. Surely though, the profit margin should be fixed and predetermined in order to be consistent with shariah principles, no?? Is this 2% change in place to accommodate fluctuations in the Bank of England base rate or simply the banks choice to change as and when needed just because they have equity in our property?
    To me this doesn’t sound quite right but I’m sure there’s something I’ve misunderstood in the process, would appreciate your clarification on the matter.

    Kind regards,

    • jzk khayr Munis – so the bank is saying “we reserve the right to increase our rent to x% but a cap of y applies.” The rent doesn’t have to be fixed and cannot be fixed over the course of a couple of decades. So the bank retains some flexibility there.


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