HSBC launches religious mortgages
HSBC is to become the first UK high street bank to offer mortgages specifically designed to comply with religious principles.
The alternative system of home loans is aimed at Muslimís, and avoids the payment of interest.
Based on principles originating in the Old Testament and in the Qur'an, Sharia Law prohibits the charging of interest.
Some Muslims have therefore developed an alternative system for mortgages whereby a bank buys the property on the customer's behalf. It then sells it to the customer charging an additional lump sum on top of the asking price.
There are also biblical sources in both the Hebrew scriptures and the New Testament which, it can be strongly argued lead to very similar conclusions about charging of interest.
The Jubilee Centre in Cambridge is one Christian organisation that has explored this idea.
However, before the recent budget using such a mortgage meant that people had no choice but to pay stamp duty twice in order to stay true to their religious principles.
Gordon Brown however announced in his Budget the abolition of the payment of this double stamp duty.
Under HSBC's new home finance scheme, the bank will buy the property outright on the customer's behalf and lease it back to them for an agreed term ñ usually 25 years, the same period as a traditional mortgage.
The customer will then pay a monthly rent instead of interest as well as a contribution towards the price of the property and become the official owner of the house after their final payment.
It is also offering an Islamic current account in which customers will not receive any interest on their balance but equally will not have to pay interest on credit. The account also has no overdraft facility.
While around 70% of the Muslim-owned homes in the UK are financed through a traditional mortgage many feel bound to rent or save up until they can buy a property outright.
Iqbal Asaria, of the Muslim Council of Britain, said: "The launch of these Islamic finance products by HSBC is welcome news for many thousands of Muslims who regularly battle with their consciences when it comes to making financial decisions."
The facilities will be available from July 14 at four branches - in Bradford, Cardiff, Birmingham and London - and at 25 sites by the end of September. A spokesman for HSBC said the facilities will also be available to non-Muslims.