Help to buy now avialable for Islamic Mortgages

Muslim house-buyers will be able to take  advantage of George Osborne’s Help to Buy scheme after ministers launched a  version which is compliant with Sharia law.

The multi-billion scheme allows people with  only a 5 per cent deposit to get on the property ladder, with the taxpayer  guaranteeing part of the mortgage.

Today the Treasury announced the guarantees  can now be used by providers of Home Purchase Plans, which can be used by  Muslims to borrow money.

Muslim borrowers will be able to benefit from the Help  to Buy scheme under new rules announced by ministers today

Mr Osborne launched the Help to Buy scheme to  help people buy a home worth up to £600,000 last year.

Thousands have already used it to purchase a  home, but there are growing concerns it could be helping to fuel a new house  price bubble.

 From today the rules of the scheme have been  changed to allow banks that sell Home Purchase Plans  to buy a government  guarantee for them.

The Islamic Bank of Britain is expected to  become the first lender to offer mortgages covered by Help to Buy.

Treasury minister Sajid Javid said the extesntion of the  scheme would help more hardworking families fulfil their home owning  aspirations.


Paying interest on a debt is forbidden under  Islamic law, meaning Muslims are unable to buy a home using a conventional  mortgage.

Islamic banks instead offer Home Purchase  Plans, under which ownership of a home is split between the customer and the  bank.

The homeowner buys a portion of the property  outright with their initial deposit and then pay regular installments to the  bank covering rent for the portion they do not own and an ‘acquisition payment’.

It means they gradually buy the property from  the bank and over time become the sole owner.

In some interpretations of Sharia law, which  is Islam’s legal system and  governs every aspect of Muslim life, loans are  forbidden.

But Home Purchase Plans  enables  followers of Islam to buy a home without having enough money to purchase it  outright.

Treasury minister Sajid Javid said: ‘I am  delighted Home Purchase Plans will now be available under the Help to Buy  scheme.

‘This gives even more choice to hardworking  families across the UK trying to fulfil their home owning  aspirations.’

Under an HPP, a property’s ownership is split  between the customer and the bank. A

fter buying a portion of the property with  their initial deposit, the purchaser of the property pays regular instalments to  the bank, covering rent for the portion they do not own and an acquisition  payment.

In this way, a customer gradually buys the  property from the bank and eventually becomes the sole owner.

Last week Mr Osborne defended his Help to Buy  scheme to guarantee billions in new mortgages against claims it is fuelling the  housing bubble which has seen prices leap by more than 11 per cent in  London.

Liberal Democrat Business Secretary Vince  Cable is among those who have voiced reservations about the impact of Help to  Buy.

Chancellor George Osborne has defended the Help to Buy  scheme, insisting it is making it easier for people to get on the property  ladder and encouraging house buying.

But Mr Osborne said: ‘We are recovering from  a property crash. Am I someone who says we should be vigilant about this?  Absolutely we should be vigilant…

‘As is clear from (the Bank of England’s)  reports, they do not at the moment see what you would describe as a bubble, but  they are vigilant.’


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