The government’s Help to Buy mortgage guarantee scheme can now also be used by providers of Home Purchase Plans.
Home Purchase Plans (HPPs) are a Sharia law compliant alternative to mortgages and are often known as ‘Islamic Mortgages’.
From today the rules have been amended to enable banks that sell HPPs to purchase a government guarantee for them. Additionally, the Islamic Bank of Britain has outlined its intention of participating to offer Home Purchase Plans under the scheme.
Sajid Javid, Financial Secretary to the Treasury, said: “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.
“Under an HPP, a property’s ownership is split between the customer and the bank. After buying a portion of the property with their initial deposit, the purchaser of the property pays regular instalments to the bank, covering rent for the portion they do not own and an acquisition payment. In this way, a customer gradually buys the property from the bank and eventually becomes the sole owner.
“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.”
