Islamic finance still active as the credit crunch deepens

5 January 2009

The last month has seen a further deterioration in the UK economy, with a deepening recession, banking bail-outs and big-name retailers going bust. However, one sector of the market still active is Islamic Finance which is now both cheaper and more accessible. Most recently, alburaq, the UK’s most innovative Islamic “mortgage” provider, has responded to interest-rate cuts by improving its range of Shari'ah-compliant Home Purchase Plans.

“Our new product range means our new customers now have products priced from the equivalent of 5.49% on their home finance,” explains Keith Leach, Head of alburaq. He continues: “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% or less.

In addition to the improving prices, there are plenty of other advantages for those choosing alburaq’s Islamic alternative. Recently, banks have been criticised for varying margins; imposing collar rates and reducing the range of mortgage products they offer.

“Collar rates” have made the headlines recently as many mortgage holders have discovered to their cost that their mortgage payments will not fall inline with the general drop in rates.

alburaq works very differently, as Leach explains: “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. 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. 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.”

Leach continues: “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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