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Birmingham and London-based Offa, the UK’s first Shariah-compliant bridging lender, today announced it has agreed a significant funding line from the Shariah-compliant bank, Gatehouse Bank.
Since launching in September 2019, Offa has seen strong demand for both its residential and commercial bridging finance products provided to UK residents, expats and international investors based overseas. It finances individuals, sole traders, partnerships, limited companies, LLPs as well as on-and offshore SPVs.
Bilal Ahmed, head of operations for Offa, said “Since we launched, demand for our Shariah-compliant bridging finance products has been far stronger than anticipated and this new funding line will help us to accommodate it. With the property market now on a stronger footing, we are looking forward to establishing a real foothold in the market during 2020 and helping Muslims and non-Muslims alike expand and enhance their portfolios through this quick and highly flexible form of finance.”
Commenting on the new partnership Paul Stockwell, chief commercial officer for Gatehouse Bank, added “The synergies between Offa and Gatehouse are clearly very strong and we are looking forward to helping establish Shariah-compliant bridging finance. There’s a huge amount of untapped demand and Offa will go quite some way to meet it.”
A bridging loan is used to borrow money in the short-term. An example is to enable you to buy a new house before you have sold your current one – such as at auction. A bridging loan would be arranged to finance the purchase of the new home. Once the old home had been sold the bridging loan would then be paid off in full.
There are two types of bridging loan: closed or open. Closed bridging loans have a fixed repayment date, while open bridging loans are expected to be paid off sometime within a period of one year.
Banks operating under Islamic finance principles are not allowed to charge interest, as this is not allowed under shariah law. In addition, shariah-compliant banks are not permitted to deal with any businesses involved in alcohol, pork, gambling, pornography, speculation, tobacco, those that charge interest or any other commodities that are forbidden (or ‘haram’) under Islamic law.
A shariah-compliant bridging loan is in line with these principles and is available to both Muslims and non-Muslims equally.
Islamic home finance differs in that traditional mortgages are not permitted, as they involve the charging of interest. Instead Islamic banks offer ‘house purchase plans’ – an arrangement where the bank will purchase the property on the customer’s behalf then lease (or rent) it back to them. Rather than repaying interest to the bank as in a mortgage, the customer now pays rent to the bank who has, effectively, become their landlord. However, once the final instalment is paid, the property then belongs to the customer. In this example, ‘rent’ is not simply another word for interest but rather a fair payment for the use of the property.
More information on Islamic House Purchase Plans can be found in our Guide to Islamic/Sharia-compliant mortgages - Home purchase plans.
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Although this week saw some lenders reducing rates, including NatWest and Barclays Mortgage, these rate reductions have not impacted the lowest rates offered in our mortgage charts
Although this week saw some lenders reducing rates, including NatWest and Barclays Mortgage, these rate reductions have not impacted the lowest rates