Islamic Mortgage UK: Complete 2026 Guide to Home Purchase Plans
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The UK has one of the most mature Islamic home finance markets outside the Gulf and Malaysia, with several FCA-regulated institutions offering Shariah-compliant alternatives to a conventional mortgage. In the UK, these products are usually called a Home Purchase Plan (HPP)rather than a "mortgage" -- a distinction that matters for both legal and tax reasons. This guide covers how HPPs work, who offers them, and how to compare providers.
What Is a Home Purchase Plan?
A conventional UK mortgage is a loan secured against a property, repaid with interest. A Home Purchase Plan avoids interest entirely by structuring the transaction as either a co-ownership arrangement (Diminishing Musharaka) or a lease (Ijara). UK legislation (the Finance Act 2003 and later amendments) specifically recognizes HPPs so that Muslims are not charged double Stamp Duty Land Tax for the bank's temporary legal interest in the property -- without this provision, Islamic home finance would be significantly more expensive than a conventional mortgage in the UK.
Who Offers HPPs in the UK
Al Rayan Bank
Al Rayan Bank is the UK's oldest and largest fully Shariah-compliant bank, regulated by the FCA and PRA and covered by the Financial Services Compensation Scheme (FSCS) in the same way as a conventional UK bank. It offers HPPs using the Diminishing Musharaka structure, typically requiring a minimum deposit around 20%.
Gatehouse Bank
Gatehouse Bank is Al Rayan's main competitor, also FCA/PRA-regulated and FSCS-covered, also using a Diminishing Musharaka structure. Gatehouse typically asks for a lower minimum deposit, around 15%, and publishes its current profit rates on its own site -- always check the live rate before comparing, since these move with the broader rate environment.
BLME (Bank of London and The Middle East)
BLME is a wholesale Islamic bank that also serves the higher end of the residential market, offering Murabaha and Ijara structures. It typically asks for a larger minimum deposit (around 25%), which reflects its focus on larger property purchases rather than first-time buyers.
StrideUp
StrideUp is a newer, FCA-regulated fintech offering a Shariah-compliant shared-ownership-style Diminishing Musharaka product with a lower minimum deposit (around 5%), aimed at buyers who cannot meet the 20-25% deposit thresholds the established Islamic banks require.
HPP vs Conventional Mortgage: Key Differences
| Feature | Conventional Mortgage | Home Purchase Plan |
|---|---|---|
| Legal structure | Loan secured on the property | Co-ownership (Musharaka) or lease (Ijara) |
| Cost of finance | Interest rate | Rent / acquisition payment |
| Stamp duty | Charged once | Charged once (HPP relief under the Finance Act 2003) |
| Regulation | FCA-regulated | FCA-regulated |
What to Check Before Choosing a Provider
- Shariah board: confirm the provider has an independent Shariah supervisory board and ask which standard it follows (e.g. AAOIFI).
- Minimum deposit: ranges from around 5% (StrideUp) to 25% (BLME) across current UK providers -- this materially affects who can qualify.
- Current profit rate: always request the live rate directly from the provider; published rates change frequently.
- FSCS coverage: Al Rayan Bank and Gatehouse Bank, as licensed banks, are FSCS-covered up to the standard limit; confirm the protection status of any non-bank provider.
Compare UK Providers
Use the Islamic Mortgage Comparison Tool to see Al Rayan Bank, Gatehouse Bank, BLME, and StrideUp side by side, including minimum deposit and financing structure for each.
Disclaimer: This article is for educational purposes only and does not constitute financial or religious advice. Provider terms, deposit requirements, and profit rates change over time -- always verify current details directly with the provider. Consult a qualified Islamic scholar and a licensed financial advisor before making home financing decisions.