The Government’s Help to Buy mortgage scheme has now been extended to include Shari’a compliant alternative to mortgages, Home Purchase Plans (HPPs), the Financial Secretary to the Treasury, Sajid Javid, announced on February 11.
Under the scheme the Government agrees to take on some of the risk of the loan on mortgages of up to 95 per cent of the home’s value. Under the home purchase plans, also known as Islamic mortgages, the buyer initially buys a portion of the home with the bank owning the rest. Over time they pay rent and a fee to acquire the remainder.
The scheme has already helped thousands get on or move up the housing ladder, and the Government remains committed to making the aspiration of home ownership a reality for as many households as possible.
The rules have been amended to enable banks that sell HPPs to purchase a government guarantee for them.
This will be particularly supportive to some Muslim homebuyers who have been unwilling to use a traditional Help to Buy mortgage because of their religious beliefs. However, the inclusion of HPPs in the Help to Buy scheme introduces more choice for all consumers and perspective homebuyers.
“I am delighted Home Purchase Plans will now be available under the Help to Buy scheme. This gives even more choice to hardworking families across the UK trying to fulfil their home owning aspirations,” said Javid
In order to purchase the government guarantee, banks will have to satisfy the same stringent criteria for an HPP as for a normal mortgage. HPPs sold in the UK are also subject to regulation by the Financial Conduct Authority (FCA), in much the same way as mortgages.