Al Rayan Bank (UK) has lowered rental rates across its entire range of discounted variable Home Purchase Plans (HPPs) by 0.25%.

Changes are as follows:

• 60% finance to value (FTV) (40% deposit); discounted variable rental rate reduced to 2.89%
• 70% FTV (30% deposit); discounted variable rental rate reduced to 2.99%
• 80% FTV (20% deposit); discounted variable rental rate reduced to 3.19%

Al Rayan Bank also has a ‘fees assisted’ HPP range, designed to make it easier for people looking to move an existing home finance product to one of its HPPs by contributing towards some of the upfront fees normally associated with refinancing from one home finance provider to another. Discounted variable rental rates across the ‘fees assisted’ range have also been reduced by 0.25%.

• Fees assisted 60% FTV (40% deposit); discounted variable rental rate reduced to 3.04%
• Fees assisted 70% FTV (30% deposit); discounted variable rental rate reduced to 3.14%
• Fees assisted 80% FTV (20% deposit); discounted variable rental rate reduced to 3.34%

HPPs are Sharia compliant mortgage alternatives which do not feature interest. Unlike conventional mortgages where money is borrowed from a lender and repaid with interest, HPPs are based upon the Islamic finance principles of co-ownership (musharaka) and leasing (ijara). A customer buys their home together with the Bank, each owning a share.  Their monthly payment consists of two elements, an acquisition payment to increase their stake in the property and a rental payment for use of the share of the home that is owned by the Bank. Over time, when all payments have been made, sole ownership transfers to the customer without interest ever having been involved in the transaction.

As an Islamic bank, Al Rayan Bank does not charge arbitrary administration fees to its HPP customers; instead administration fees reflect the effort of its employees and the reasonable costs incurred by the Bank. The administration fee for Al Rayan Bank’s ‘fees assisted’ HPP range is £0*whilst for its standard HPP range the administration fee is £399.