Radical reform for Islamic mortgages [UK]

From: "I khan" <no1khan@xxxxxxxxxxx>
To: <imran_dist@xxxxxxxxxxxxx>
Date: Thu, 10 Apr 2003 13:27:18 +0100
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Radical reform for Islamic mortgages    
By Alexander Jolliffe and Jane Croft.   
Published: April 9 2003 16:18 | Last Updated: April 9 2003 16:18        
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The chancellor on Wednesday unveiled plans for radical reform of Islamic
mortgages which make could home loans cheaper for Britain's 1.8m
Muslims.

The news led Halifax, Britain's biggest mortgage lender, to say it would
investigate the market closely. The mortgage industry said it was
"delighted" by the plans.

The shake-up follows lobbying by Britain's mortgage industry, which was
held back from developing Muslim home loans by stamp duty and sharia,
Islamic law.

The problem arose because Islam forbids the payment or receipt of
interest. Islamic mortgages rely on financiers who buy properties and
sell them to the buyers, then collect payments for the repayment of
capital.

Instead of charging interest, the financier often sells the property for
the same price but charges additional rent for a specified period.
Muslim homeowners pay stamp duty twice because the ownership of the home
changes twice  once to the financier, and once to the ultimate buyer.

The Treasury said it would "sweep that away, so most of these mortages
will become cheaper." The government plans to introduce the change on
December 1.    The Council of Mortgage Lenders was "delighted" by the
news, which it said would give another boost to the development of
sharia-compliant finance. Andrew Buxton, chairman of the Bank of England
working party on Islamic home finance, said: "The excellent work being
done by the industry, regulators and government departments to reduce
the barriers to Islamic mortgages shows that there's a will, there a
way.

"We look forward to the passing of the Finance Bill, which will pave the
way for cheaper Sharia-compliant mortgages. This will help to make the
mortgage market fairer and more and more accessible to the Muslim
community in the United Kingdom."   The news raises the prospect of new
entrants into the Islamic finance market, where banks such as HSBC and
Barclays have been examining whether to offer Sharia-compliant products.
Halifax, Britain's biggest mortgage lender and part of the HBOS group,
said it believed there was potential in this market and it would be
looking carefully at it.

Sir Edward George, governor of the Bank of England, last month said
there was nothing in principle to stop fully fledged Islamic financial
institutions setting up in this country.

Their customers could gain a new incentive to invest in property because
mortgages would get cheaper, said Jonathan Rice, tax partner at Deloitte
& Touche, the accountancy. "It will arguably encourage the Islamic
community to buy more property because they will only be hit by stamp
duty once."   The shake-up also raises the possiblity that financial
services groups will move into other areas of the Sharia-compliant
finance market. Iqbal Asaria, chairman of the Business and Economics
Committee of the Muslim Council of Britain, said last month the launch
of Sharia-compliant mortgage products in 2003 could lead to other
products, including savings, family insurance, pension products and also
possibly a fully Sharia compliant Isa.

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Radical reform for Islamic mortgages [UK]

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