Halal Mortgages UK: Home Purchase Plans Compared (2026)

A halal mortgage in the UK is a home purchase plan (HPP): the provider buys the home with you, you pay rent on the share it owns, and you buy that share from it over time until the home is fully yours. There is no interest-bearing loan. HPPs are regulated by the FCA like ordinary mortgages, stamp duty is the same, and the main UK providers are AlRayan Bank, Gatehouse Bank, StrideUp and Kuwait Finance House. Expect to pay a little more than the cheapest conventional mortgage.

How a home purchase plan works

Say you are buying a £300,000 home with a £45,000 (15%) deposit.

1. You and the bank buy the property together. You own 15% and the bank owns 85% (£255,000).
2. Each month you pay two things: rent on the bank’s 85% share and an acquisition payment that buys a little more of that share.
3. As your share grows, the rent you pay falls, because you are renting a smaller slice.
4. At the end of the term (say 25 years) you own 100% and the bank’s share transfers to you.

From your bank account, it looks and feels much like a repayment mortgage: a fixed monthly payment for a set period, then a variable rate unless you switch to a new deal. The legal structure underneath is different, and that is what makes it Sharia-compliant in the view of most scholars.

The three models

AAOIFI, the international standard-setter, publishes standards on ijara, musharaka and murabaha that UK providers’ Sharia boards use. Each provider names its Sharia supervisory board or adviser and publishes their approval. StrideUp, for example, states its plan is certified by Amanah Advisors.

“Isn’t the rent just interest?”

It is a fair question, and you will hear it at the mosque. The rental rate is often set with an eye on market rates, and the monthly payment can end up close to a mortgage.

The mainstream answer from scholars who approve HPPs: what matters is the contract, not the number. The bank genuinely owns part of a real asset, carries ownership risk (for example if the property is destroyed and not insured) and charges rent for its use. A lender charging interest owns nothing and carries none of that. Benchmarking a rental rate to market prices is permitted, in the same way a landlord can look at local rents.

A minority of scholars are less comfortable, especially where the contract shifts most risks onto the customer. If this matters to you, read the provider’s Sharia approval and ask your own scholar.

UK providers compared (checked November 2026)

Rates change often and the headline rate usually needs a large deposit. Treat the figures above as a snapshot and check the provider or a broker for today’s deals.

AlRayan Bank

The biggest and longest-running option. Products cover first-time buyers, home movers, refinancing and buy-to-let, with fixed rental rates for two or five years. Its low-deposit 90% and 95% range was initially for customers in England. It also has a Sharia supervisory committee of independent scholars whose reports are published with the bank’s annual accounts.

Our pick for most buyers: Get a quote from AlRayan Bank and Gatehouse Bank on the same day, at the same deposit, and compare the total cost over the fixed period.

Gatehouse Bank

Gatehouse has been the most active on pricing recently: rate cuts of up to 0.66% in June 2026, refinance products without application or product fees in September 2026, and it dropped its own-funds deposit requirement for discounted purchases from family members. It also has a strong expat and overseas-investor range.

StrideUp

StrideUp is newer and uses its own co-ownership structure. You start with your deposit as your share and pay rent on the rest. It suits buyers in England with a 10% deposit and straightforward income. Check its fees and how its “buyout share” and rent reviews work before you commit. See StrideUp’s plans.

Wayhome: a different thing

Wayhome is often mentioned in the same breath, but it is a part-buy, part-rent scheme rather than a home purchase plan. Its funding partners own most of the home and you pay market rent on their share, with no debt. Darul Iftaa Birmingham has described the arrangement as diminishing musharaka. The catch: you can only buy up to 40%, after which you must buy the rest in one go. That usually means taking a mortgage or HPP at that point, so you are not avoiding the question, just delaying it. Its help centre has also said it was not accepting new offers while it raised a new fund, so check before you plan around it.

What it really costs: halal vs normal mortgage

HPP rates usually sit somewhat above the best conventional deals. Gatehouse’s June 2026 starting rates (5.58% two-year, 5.53% five-year) give a feel for the market. The cheapest mainstream fixes at large deposits were typically lower than that around the same time, but the gap moves week to week.

Illustrative example (rates chosen for the example, not quotes):

Borrowing/financing £255,000 over 25 years:

So a gap of three-quarters of a percentage point costs roughly £110 a month on a typical first-time buyer’s balance. A gap of a quarter of a point is under £40. That is why getting two or three quotes matters more than anything else.

Things that close the gap:

• A bigger deposit. Rates drop at 65%, 75% and 80% finance-to-value, just like mortgages.
• Fees. Some HPPs have no product fee; some conventional deals with low headline rates carry fees of £999 or more. Compare the total.
• A broker who knows Islamic finance. Most mainstream brokers can place HPPs, but not all do. Ask before you start.

Things that widen it:

• Fewer products means less choice for unusual cases: self-employed, contractors, new-build flats, high income multiples.
• Exit fees and early payment charges work much like early repayment charges on mortgages. Check them.
• Some providers charge extra legal costs because the conveyancing is a little more complex. Use a solicitor who has done HPPs before.

Stamp duty

You pay the same stamp duty as with a normal mortgage. Without special rules the bank’s purchase and the later transfer to you would be taxed twice. HMRC’s alternative property finance reliefs (Finance Act 2003 sections 71A to 73, extended to authorised HPP providers by the Finance Act 2015) stop that. Your solicitor claims the relief on the land transaction return. First-time buyer relief still applies if you qualify.

Scotland (LBTT) and Wales (LTT) have equivalent reliefs. Check with your solicitor.

Regulation and protection

• FCA-regulated. Home purchase plans have been regulated since 2007 and follow the same mortgage conduct rules: affordability checks, clear documents and fair treatment if you fall behind.
• Financial Ombudsman Service. You can complain to the Ombudsman if something goes wrong, as with a mortgage.
• Your home is at risk if you do not keep up payments. In the worst case the provider can take possession, exactly as with a mortgage.
• Late payments. Islamic providers usually cannot profit from late-payment penalties. Any charge is either a real cost or passed to charity. Read the tariff.

Step by step: getting a home purchase plan

1. Work out your budget. Check the deposit (5% minimum at some providers, 10% at StrideUp) and get a rough idea of what you can afford.
2. Get a decision in principle from at least two providers, or ask a broker to do it.
3. Compare the total cost over the fixed period: monthly payments × months + fees.
4. Find a solicitor who has handled HPPs. Ask your provider for its panel.
5. Make your offer, apply in full, get the valuation done and exchange.
6. Diary the end of your fixed period. Switch to a new fixed rental rate before you drift onto the variable rate.

If you are saving for a deposit, a halal savings account can add expected profit while you wait. For the bigger picture, including Zakat and what to do about other interest-bearing products, see our Islamic finance guide. If you already have debts, our guide to paying off debt can help you clear them before you apply.