Is the Islamic Mortgage market dying a slow death?

When Islamic mortgages first hit the market place they were truly revolutionary and for many years they have been the shariah solutions to many Muslims in the UK. But, six years on, have they truly been a god send or have we as Muslims realised the error of our way and referred back to the cheaper main stream alternatives?

The current situation in the market is that minimum finance amounts are now at 60% to 65%, with a minimum deposit ranging from 40% to 35%.  The so called profit rates (the alternative interest rates of Islamic mortgages) are also relatively high.  With some lenders like Alburaq (who was the market leader at one point) now requiring minimum finance of £500,000.

For the average Muslim, these minimum requirements are far too high and thus exclude the vast majority of the Muslims in the UK from getting an Islamic Mortgage.  Islamic Mortgages now tend to focus on the very top tier of professional Muslims. There is no product on the market which competes with the conventional products.

So what does the future hold?  More of the same I’m afraid.  For the next 6 to 12 months we will not see any dramatic change in the current situation or any radical change in the financial products of the Islamic Banks in the UK.  Caution seems to be the current strategy.  There is a real and growing void in the market place and we have not yet seen any Islamic institutions move to fill it; nor has there been any movement from any overseas Middle East players to take a sizeable chunk of the UK Islamic mortgage market.  (They are more interested in buying football teams)!

The Islamicness or shariah compliance is no longer a big issue for many Muslims looking at these products, rather, since the fundamentals of Islam in these products is now widely accepted.  What is now important is the level of competiveness of these products compared to the conventional market, and making them wider stream than they currently are.

I, for one, who has been in this market since its inception, am very disappointed to see the market almost go full circle and begin to implode on itself.  Don’t get me wrong, we still have a long way to go before the market matures, however, the global credit crunch has taken its toll on the Islamic institutions just like many conventional ones (even thou the media tells us otherwise); simply because all have battened down their hatches, and that includes the Islamic Bank of Britain (their Islamic mortgage now asks for 40% deposit).

85% of the individuals who make inquiries to our website www.islamicmortgages.co.uk cannot meet the basic criteria of the current Islamic Mortgages; the vast majority of the Muslims looking to buying a home have no choice but to source an alternative in the conventional market.

The Islamic mortgage market is therefore dying a slow death, unless the many Islamic Institutions now in the UK, can change their way of thinking and become the innovators and pioneers they once were.

Nusrat Janjua
Marketing Director
IslamicMortgages.co.uk