The Financial Services Authority has just authorised its first purely Islamic Bank in the UK. The Islamic Bank of Britain will start trading in September.
Our view
There are nearly two million Muslims in the UK. The Muslim faith prevents people from receiving or paying interest. As such, this presents extreme difficulties for people who wish to remain true to their faith with only the super-rich able to buy property with cash.
A number of banks and building societies have come up with some unique mortgage schemes to enable people to buy property. These are special mortgage schemes such as the Murabah Mortgage (where your bank buys the house and then immediately sells it to you at a much higher price) and the Ijara Mortgage where the Bank again buys the house but you then save the purchase price over the term and then buy the property at the end once you have enough money.
This is very good news for the Muslim community and hopefully brings greater choice.