Islamic Mortgages in the UK

There is no such thing as an Islamic mortgage in the strict sense, because a mortgage is a loan and a loan charges interest. What the UK actually offers is a Home Purchase Plan (HPP) — a regulated product where the provider buys the property with you and you buy them out over time, paying rent on the share you do not yet own.

You still make a monthly payment. You still need a deposit. The difference is what the payment legally is: rent on someone else's share of a house, rather than interest on borrowed money.

At a glance

Product name: Home Purchase Plan (HPP)
Regulated by: The FCA, like a mortgage
Typical deposit: Usually higher than 5%
Main providers (2026): Gatehouse Bank, StrideUp
Stamp duty: Charged once, same as a mortgage

Key Takeaways

A Home Purchase Plan is the UK's Sharia-compliant alternative to a mortgage, and it is FCA-regulated with the same complaint rights.
You co-own with the provider and pay rent on their share, buying it down over the term until you own the property outright.
Al Rayan Bank — for years the biggest name — paused new Home Purchase Plan applications, so the active market in 2026 is smaller than most guides suggest.
It is not free. The rent element is priced against a market benchmark, so the monthly cost is broadly comparable to a mortgage and sometimes higher.
Stamp duty is charged once, not twice. The double charge was removed in 2003.

How a Home Purchase Plan works

You and the provider buy the property together. If you put in 20%, you own 20% and they own 80%.

Each month you pay two things bundled into one payment: an acquisition payment that buys a slice of their share, and a rent payment for occupying the share you do not yet own. As your share grows, the rent portion shrinks — which is why the early years feel front-loaded in much the same way an interest-only-heavy repayment mortgage does.

At the end of the term you own 100% and the provider's name comes off the title.

The three structures

You will see these names used, sometimes interchangeably and not always accurately.

Diminishing Musharaka (co-ownership). The most common structure in the UK today, and the one described above. You and the provider are partners, your share increases, their rent falls.

Ijara (lease to own). The provider buys the property outright and leases it to you. You pay rent for the term, and ownership transfers to you at the end. Your name may not be on the title during the term, which some buyers dislike.

Murabaha (cost-plus sale). The provider buys the property and immediately sells it to you at an agreed higher price, payable in instalments. The total is fixed on day one, so there is no rate review — but it requires a large deposit and is rare for residential purchases in the UK.

Who actually offers them in 2026

This is where most guides go stale, so treat any list — including this one — as a starting point to verify rather than gospel.

Al Rayan Bank was for years the dominant provider. It paused new Home Purchase Plan applications, citing market conditions and service levels for existing customers. It was described as temporary, but no return date has been given. If you read an older guide recommending Al Rayan, check before you get your hopes up.

Gatehouse Bank and StrideUp are the two names actively writing new business. Gatehouse has been in the market since 2007 and also does buy-to-let. StrideUp is a fintech offering co-ownership plans from a smaller deposit than has historically been available.

Offa received FCA authorisation in 2025, and Pfida and Kuwait Finance House also operate in this space with differing models and eligibility.

Because the market is this thin, a broker who genuinely knows Islamic finance is worth more here than in the conventional market, where comparison sites do the job.

Is it more expensive?

Usually a little, sometimes noticeably, occasionally not at all.

The rent element has to be priced against something, and providers benchmark it against market rates. So when conventional mortgage rates rise, HPP rents tend to follow. You are not escaping the cost of money — you are changing the legal basis on which you pay it.

The bigger practical cost is choice. With a handful of providers rather than ninety, you have less competition working in your favour, fewer product types, and less room to negotiate. Compare the total monthly payment rather than any headline figure, and work out what you would actually pay across the fixed period:

Mortgage repayment calculator

Capital & interest, monthly repayment estimate

Loan amount

Interest rate

Term (years)

Monthly repayment£1,390

£166,874total interest

Estimate only. Your lender’s actual rate, fees and criteria will differ.

Deposit, regulation and protection

Deposit. Historically Islamic home finance needed 20% or more. That has eased — StrideUp advertises plans from a 10% deposit — but you should still expect to need more than the 5% a conventional first-time buyer might manage. See how much deposit you need.

Regulation. Home Purchase Plans are regulated by the FCA. That means proper disclosure, affordability assessment, and access to the Financial Ombudsman Service if something goes wrong. You are not stepping outside the regulated system to use one.

Stamp duty. Buyers used to be charged twice, because the property legally changed hands twice. That was fixed in 2003 and you now pay once, exactly as you would with a mortgage. Work out the bill with the stamp duty calculator, and read stamp duty explained if you are a first-time buyer or buying an additional property.

Getting it right for you

Scholarly opinion is not uniform. Some scholars accept HPPs without reservation; some regard particular structures as too close to a loan in substance; a minority argue necessity permits a conventional mortgage where no alternative is realistically available. That is a question for someone qualified to answer it, not for a money website.

What this page can tell you is the financial mechanics — and that if you want a Sharia-compliant route in the UK, it exists, it is regulated, and the market is currently narrow.

Frequently Asked Questions

Is a Home Purchase Plan really interest free?

No interest is charged, and that is the legal and structural point. But there is still a cost of finance, priced as rent on the provider's share and benchmarked against market rates. "Interest free" is not the same as "free".

Can I get an Islamic mortgage as a first-time buyer?

Yes, and first-time buyers are a large part of this market. The practical constraint is the deposit, which is typically higher than the 5% available on some conventional deals.

What happens if I want to move or overpay?

Both are normally possible, but the terms vary more between providers than in the conventional market, and early-repayment terms are structured differently from a mortgage's early repayment charge. Ask specifically, in writing, before you commit.

Are Islamic home finance products covered by the Financial Ombudsman?

Yes. Home Purchase Plans are FCA-regulated, so you can complain to the provider and escalate to the Financial Ombudsman Service if you are not satisfied.

Is buy-to-let available on a Sharia-compliant basis?

Yes. Gatehouse Bank offers buy-to-let purchase plans, and the structure works the same way — co-ownership with rent on the provider's share. The tax treatment is identical to any other landlord's, including Section 24.