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Islamic Bank of Britain (IBB, www.islamic-bank.com) today embarked on a drive to increase its share of the mainstream mortgage market with the launch of its fixed rate Home Purchase Plan (the mortgage alternative).

The product offers a low rental rate of 3.99%, and, with an administration fee of only £299, represents one of the lowest home finance rates available in the UK when compared to its conventional fixed rate mortgage counterparts (see table below).  It is also the launch-pad for the Bank to compete head-on with conventional banks for their new and existing customers, dispelling the myth that Islamic Banking is costly.

The fixed rate Home Purchase Plan (HPP) offers customers an attractive and competitive package with:

3.99% rental rate fixed until the end of June 2010***
No penalties for making extra capital payments
Administration fee of only £299
No minimum collar rate
No tie–in when fixed rate ends

Sultan Choudhury, Commercial Director at Islamic Bank of Britain (IBB) commented, “IBB is really throwing down the gauntlet to conventional banks with this new fixed rate Home Purchase Plan.  A rate of 3.99% with a fee of only £299 is practically a give away! This deal is probably the most competitive offer currently available in the UK home finance market.”

Mr. Choudhury continued, “Not only is our Home Purchase Plan extremely competitive, Islamic Banking is also considered by many as an ethical and stable alternative to conventional banking. The Bank is open to customers of all faiths, so my call to UK homebuyers and homeowners is to put any misapprehensions to one side and come and find out how a Home Purchase Plan from IBB can really make a difference to your pocket.”

Open to all faiths, the Bank provides the assurance that its source of funds for the HPP is 100% Sharia’a compliant; IBB will not use any interest bearing instruments like bonds or derivatives to finance customer’s homes. It will instead use its own funds or the deposits from its customers, all managed purely on a Halal and ethical basis.

Each monthly payment will consist of two elements:

• Rent element – this is the amount that the customer is paying to the Bank as rent on the Bank’s share of the property.  This is in accordance with an Ijara (Lease) agreement.
• Acquisition element - this is the amount that the customer is paying to purchase a part of the Bank’s share in the property.  This is in accordance with a Diminishing Musharaka (partnership) agreement.

The rent element decreases as the Bank’s share in the property decreases with each acquisition payment.  Correspondingly, the customer’s equity in the property increases, with every payment.

The customer can buy the Bank’s share, in part or full, or sell the property at anytime without any penalty. The Bank does not claim any share in any appreciation of the property.