Gatehouse Bank has launched its first product for homebuyers – a Shariah-compliant Home Purchase Plan (HPP).

The plan is an alternative to a conventional mortgage, and does not charge interest.

Instead the bank and customer are joint owners of the property and the homebuyer pays rent on the share of the property that the bank owns.

How it works

The new Home Purchase Plan offers customers two options:

• Acquisition and rent (the equivalent of a conventional capital and interest mortgage)
• Rent only (the equivalent of a conventional interest-only mortgage).

The initial product, a two-year fixed term HPP, requires a 50% deposit, and comes with a rental rate of 3.19%, which will revert to the Bank’s Standard Variable Rate, which is currently 5.50%, after the fixed term.

The product comes with no Early Settlement Charge, even during the fixed term.

The plan is also available to expats at a 3.75% initial rental rate and international customers at a 3.99% initial rental rate.

Charles Haresnape, CEO of Gatehouse Bank, said: “We aim to bring additional competition to the home finance market and, due to our Shariah principles, we will not be charging early settlement charges on our Home Purchase Plans, which we believe will prove to be a popular feature with many homebuyers.

“Gatehouse plans to offer competitive products together with human underwriting that will appeal to all homebuyers, Muslims and non-Muslims alike.”