How the structures differ
Conventional mortgage
A conventional mortgage is a loan. The bank lends you money to buy a property and charges you interest on the loan. You repay the original amount (capital) plus interest over an agreed term — typically 25 to 35 years. The bank holds a legal charge over the property as security, but you are the sole owner from day one.
Halal home purchase plan (Islamic mortgage)
A halal home purchase plan is not a loan — it is a co-ownership arrangement. The most common UK structure is Diminishing Musharakah: the bank and you jointly purchase the property. You pay monthly payments consisting of rent (for use of the bank's share) and an acquisition payment (to buy more of the bank's share). There is no interest — only rent and a purchase price.
The key difference in one sentence: A conventional mortgage involves borrowing money at interest. A halal home purchase plan involves co-owning a property and paying rent on the portion you don't yet own.
Both still move with the market. Even though halal profit rates aren't interest, they're typically benchmarked against the same reference rates as conventional mortgages — so both tend to rise and fall together when the Bank of England base rate changes. Currently 3.75%.
How the costs compare
The total cost of a halal home purchase plan is often comparable to a conventional mortgage, but the two work differently:
- Conventional mortgages quote an annual interest rate (e.g. 4.5% APR) that reflects the cost of borrowing money
- Halal home purchase plans quote a rental rate or profit rate that reflects the cost of renting the bank's ownership share
In practice, the monthly payments from a halal provider may be slightly higher than the very lowest conventional rates, but are typically competitive with the mainstream market. The gap has narrowed significantly in recent years as more Islamic finance providers have entered the UK market.
⚠️ Always compare the total amount payable over the full term, not just the monthly payment or the headline rate. A lower monthly payment is not always a lower total cost.
Ownership and your rights
| Aspect | Conventional mortgage | Halal home purchase plan |
|---|---|---|
| Who owns the property? | You (with bank's charge) | You and bank jointly |
| Can you sell? | Yes — repay mortgage from proceeds | Yes — bank receives their share of sale proceeds |
| Can you rent it out? | Requires buy-to-let mortgage | Usually requires separate buy-to-let plan |
| Can you overpay? | Usually yes (subject to limits) | Usually yes (increases your ownership share) |
| Early settlement | Early repayment charge may apply | Check terms — varies by provider |
FSCS protection
Both Gatehouse Bank and StrideUp are FCA-regulated, and their customers' deposits are protected by the FSCS. However, the home purchase plan product itself is not a deposit — it is a financial commitment, and your property can be repossessed if you fail to make payments, just as with a conventional mortgage.
Which is right for you?
For British Muslims, the question is usually not "which is cheaper?" but "which is permissible?" Most Islamic scholars hold that a conventional mortgage is not permissible, as it involves paying and receiving riba. Some scholars allow conventional mortgages in cases of dire necessity (darura) — but this is a minority position and should be discussed with a qualified Islamic scholar in your specific circumstances.
Halal home purchase plans are widely available in the UK, competitively priced, FCA regulated, and Sharia-certified. There is no longer a compelling argument that there is no halal alternative. See our full Islamic mortgages UK 2026 guide for a comparison of active providers.
Frequently asked questions
Not necessarily. The profit rate on a halal home purchase plan is often comparable to conventional mortgage rates, and the gap has narrowed significantly in recent years. Always compare the total cost over the full term, not just the monthly payment. Some buyers find halal plans slightly more expensive; others find them competitive.
In Diminishing Musharakah, both you and the bank are co-owners initially, with your ownership share growing each month. For legal and practical purposes (you live in it, you pay for maintenance, you benefit from price growth), it functions like ownership from day one. You are listed on the title deeds. At the end of the term you own 100%.
Some scholars allow conventional mortgages under the principle of darura (necessity) — for example, if a family has no access to halal alternatives and faces genuine hardship. However, given that halal alternatives now exist in the UK from multiple providers at competitive rates, the necessity argument is increasingly difficult to sustain. Consult a scholar you trust for your specific circumstances.
Under a halal home purchase plan, if you consistently miss payments the provider can still repossess the property — just as with a conventional mortgage. The consequences of non-payment are functionally the same. Always ensure the monthly payments are genuinely affordable before committing.