Lloyds TSB is to launch a range of Islamic mortgages, which comply with the principles of ijara (lease-to-own) and diminishing partnership. This follows the launch of a current account in February, which complies with sharia law.
In this form of Islamic home finance, the customer and bank jointly buy and own the property. The bank purchases up to 90% of the property, while the customer purchases the remaining percentage with an initial payment.
Through monthly payments, the customer buys the banks share of the property over an agreed period, and also pays rent as part of this payment. This diminishes over time as the proportion of monthly payments decreases.
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