British Muslims seeking Sharia-compliant home finance face slower decisions and heavier administration than mainstream borrowers, according to new national research from fintech lender Offa.
A report based on surveys of 3,000 people suggests that eight in 10 British Muslims believe their choice of home finance is restricted because of their faith, a situation the study describes as a “financial faith penalty”.
The research argues that faith-aligned borrowing too often comes with slower application processes, excessive paperwork and weaker customer experiences than those available in the conventional mortgage market.
The report, titled From faith penalty to financial fairness: Unlocking the potential of British Islamic home finance, draws on polling of 1,000 British Muslims carried out by Muslim Census and a further 2,000 British non-Muslims surveyed by OnePoll.
INDUSTRY PROCESS AND SERVICE GAPS
Among the 24.3% of British Muslims who have previously used Islamic home finance, decision times were a consistent source of frustration.
Nearly two thirds, 62%, said they waited up to two weeks for a finance decision, while 17% waited between 15 and 31 days and a further 16% waited more than a month. Only 5% received a same-day decision.
When asked about the main challenges they encountered, respondents most frequently cited long decision times, at 28%, followed by excessive paperwork, at 22.6%, and poor customer service, at 18.9%.
Islamic home finance differs from conventional lending in that providers do not charge interest and avoid exposure to sectors considered harmful to society, including gambling, alcohol, tobacco, arms and animal testing.
The report suggests that these principles are being undermined by operational models that have not kept pace with wider mortgage market standards.
Sagheer Malik, chief commercial officer and managing director of home finance at Offa, said: “Property is the asset class of choice for many of the UK’s 3.87 million Muslims, both as a route to generational wealth and as a long-term financial foundation, yet our insightful research report reveals that British Muslims are being underserved and deterred by slow, outdated and opaque Islamic home finance provision.
“This is not a niche concern, in fact it goes to the heart of financial fairness and inclusion in modern Britain. Our research indicates that British Muslims both desire and deserve high-quality, Sharia-compliant home finance products that match mainstream standards on price, speed and simplicity.
“There is no reason why we should not offer equivalent modern products and systems driven by the latest technology, which is what we at Offa are delivering.”
HOME OWNERSHIP AND FAITH
The research shows that home ownership aspirations among British Muslims broadly mirror those of the wider population. Almost four in five, 79.1%, said their primary motivation was to provide a stable home for their family, while 18.6% cited building generational wealth and investment. Only 2.2% said they did not want to own a home.
Faith considerations remain central to financial decision-making. More than nine in ten respondents, 94.2%, said it was important that their financial products align with their ethical or religious beliefs, with 77.1% describing this as important and a further 17.1% as somewhat important.
Despite this, take-up of Islamic home finance remains relatively low. Just 12.8% said they were currently using Sharia-compliant home finance, while 11.5% had done so in the past. This leaves more than three quarters, 75.7%, who have never used Islamic home finance.
Among British Muslims currently using conventional mortgages, more than half, 50.7%, said they felt unhappy or uneasy about doing so because of the conflict with their faith.
WIDER ETHICAL APPEAL
The report also points to potential growth beyond the Muslim community. Among British non-Muslims, 64% said they had never heard of Islamic home finance. However, once the principles were explained, 63% said they favoured its ethical approach.
Younger generations appeared significantly more open to the concept. More than four in 10 Gen Z respondents, 43%, and 37% of Millennials said they would consider using Islamic home finance, compared with just 7% of Baby Boomers. A strong majority of younger respondents also said it mattered that their finance provider avoids investing in sectors widely regarded as ethically harmful, with 77% of Gen Z and 72% of Millennials expressing this view.
The report concludes that addressing process inefficiencies and service standards could help Islamic home finance move from a niche offering to a more mainstream proposition, particularly at a time when ethical considerations are playing a growing role in financial decision-making across the housing market.
