Demand for Sharia mortgages and insurance is limited, new research reveals.
A study by the University of Kent reveals Muslims generally opt for conventional mortgage products over Sharia-compliant mortgages where the payment or receipt of interest on loans is forbidden.
The study showed difficulties in accessing Sharia-compliant products, problems in negotiating with vendor’s solicitors, higher initial costs and issues to do with building up equity in the course of a mortgage, all held back the uptake of Sharia mortgages.
Peter Taylor-Gooby, professor of social policy at the University of Kent, said: “There has been much debate about how the institutions of Sharia are compatible with UK traditions.
“This work shows that many Muslims are flexible between Sharia and interest-based mortgages and that there is a ready market for Sharia products alongside the established products.”
None of the Muslim respondents in the study had a Sharia compliant product, but a few said they were trying to pay the mortgage off as quickly as possible to avoid paying interest for too long.
Others preferred to borrow money from family members.
However, HSBC is seeing strong growth in its Shariah-compliant Amanah brand.
A spokesperson for the bank said: “Shariah mortgages are certainly niche, but they are seeing pretty strong growth.”
He added interest has grown in the mortgages of late as the price on a conventional mortgage has grown amid the credit crunch.
HSBC is now planning to grow its stable of Shariah-compliant products which already include home insurance, pensions and current accounts besides mortgages.
“As a company we are not going to invest in an area that goes not have great potential,” the HSBC spokesman said.
There are currently three types of Sharia compliant mortgages available in the UK: Ijara (lease), Musharaka (partnership), and Murabaha (profit).
Home purchase plans (HPP) are used instead of standard mortgages, where the lender will charge rent or include profit in the amount to be paid back, instead of charging interest on the loan.
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