Al Rayan Bank (UK) has announced the lowest ever rental rates on its Home Purchase Plan (HPP) and Buy to Let Purchase Plan (BTLPP) products.
HPPs are available with fixed rental rates from 2.44%, while BTLPPs are available with fixed rental rates from 2.99%.
In addition, the Bank has reduced the fixed rental rate of its 90% finance to value HPP, which is backed by the Government’s Help to Buy scheme by 0.8 basis points to 3.69%.
All rental rates on its other HPP and BTLPP products have been reduced by up to 0.5 basis points.
For homeowners, the following HPP rental rates now apply to new customers:
- 60% finance to value: a fixed rental rate of 2.44% and a discounted variable rental rate of 2.64%
- 70% finance to value: a fixed rental rate of 2.54% and a discounted variable rental rate of 2.74%
- 80% finance to value: a fixed rental rate of 2.74% and a discounted variable rental rate of 2.94%
- 90% finance to value: a fixed rental rate of 3.69%.
For landlords, the following BTLPP rental rates now apply to new customers:
- 65% finance to value: a fixed rental rate of 2.99% and a discounted variable rental rate of 3.19%
- 75% finance to value: a fixed rental rate of 3.39% and a discounted variable rental rate of 3.49%
Following the fixed or discounted period, all rental rates will revert to the Al Rayan Bank Variable Rental Rate. For HPP products currently this is the Bank of England Base Rate (BBR) plus 3.99%, and for BTLPP products it is BBR plus 4.99%.
Unlike conventional mortgages where money is borrowed from a lender and repaid with interest, the Al Rayan Bank home and property finance range is based upon the Islamic finance principles of Co-Ownership (Diminishing Musharaka) with Leasing (Ijara). A customer buys the property together with the Bank and pays rent on the Bank’s share in addition to an acquisition payment which increases their share in the property.
Over time the customer’s share in the property increases and at the end of the finance term, the customer owns the property outright.