380. Islamic mortgages.

There are two basic types of Sharia compliant schemes for providing finance to assist in the purchase of property1.

The Murabaha scheme involves a bank purchasing the property on behalf of the buyer and then reselling it to the buyer at a higher price. The buyer pays for the property by instalments. The repayment term is usually short (around 15 years). Murabaha arrangements satisfy the requirements of a regulated mortgage and are therefore regulated by the Financial Conduct Authority (FCA)2.

The Ijara and Diminishing Musharaka schemes permit a bank to buy the property and then to lease it to the buyer.