Islamic mortgages remain busy in downturn

Tuesday, 06 January 2009 07:59

Islamic mortgage lending is maintaining its strength, despite mainstream lending dropping in the credit crisis fall-out.

Furthermore as high street lenders seem unwilling to pass on Bank of England interest rate cuts, the Islamic finance industry has been dropping its costs and is maintaining products such as buy-to-let mortgages.

Alburaq, Shari'ah-compliant Islamic home finance provider, has responded to recent interest-rate cuts by improving its range of home purchase plans.

"Our new product range means our new customers now have products priced from the equivalent of 5.49 per cent on their home finance," said Keith Leach, head of alburaq.

"The new year could bring even lower rates for our customers. If rates continue to fall as predicted, from March 09 many of our customers could be paying a rate equivalent to 4.5 per cent or less."

Mr Leach also explained customers of Islamic alternatives to mortgages do not face the same confusions over the cost of mortgages and clauses - known as collars - that prevent interest rates from falling on mortgages.

"When applying for a mortgage, the public would be well-advised to study carefully what margin will be applied, for how long it is guaranteed and whether there is a 'collar' rate," he said.

"One of the distinguishing features of our products is that we fix our margins so these are clearly known from the outset and we don't have a 'collar' on our rates."

He added: "In addition, we don't tie-in our customers for when we offer incentives, like fees assisted or cashback offers. We also allow unlimited overpayments, which isn't always available with other Islamic or conventional mortgages."

Mr Leach concluded: "Unlike many of the UK banks, we continue to offer a full range of products and we are still offering buy-to-let finance - which has almost disappeared from the conventional market."

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