Islamic Bank of Britain throws down the gauntlet with 5.49% Home Purchase Plan refinance rate and up to £30,000 free rental prize draw*

Rent rate is lowest ever for a Sharia’a compliant mortgage alternative in the UK Refinance customer’s given free valuation and customer’s legal fees up to £800

November, 2008 – Islamic Bank of Britain (IBB) today announced another first with the launch of a range of market-leading and highly competitive offers for its Home Purchase Plan, the Sharia’a compliant alternative to a mortgage. Squaring up to providers of both conventional mortgages and Sharia’a compliant home finance, the Bank shrugged off the credit crunch with a prize draw, offering customers who complete their drawdown by 31st December 2008 the chance to be entered into a prize draw to win 12 months free rental payments, up to the value of £30,000.

Aimed at refinancing customers and new purchasers, rental rates begin at 5.49%. This is the lowest rate on an Islamic home finance product in the UK, and compares favourably with ‘conventional’ mortgages, further dispelling the myth that Sharia’a compliant finance is always more expensive than that on offer from high street banks.

Further, for refinance customers, IBB will cover legal fees of up to £1200 and also provide a free valuation for the property. The rental rate is discounted until the end of March 2010**, and unlike many conventional discounted rate mortgages there are no penalties for making extra capital payments, unless the whole balance is repaid.

Sultan Choudhury, Commercial Director at Islamic Bank of Britain (IBB) commented, “Despite the recent market turmoil Islamic Banking is considered by many as a stable alternative to conventional finance providers, which are struggling under the strain of the credit crunch. With these fantastic new Home Purchase Plan (HPP) rates, Islamic Bank of Britain can now be seen as both a safe and affordable alternative to the conventional mortgage. However, it’s not just great rent rates that IBB is offering, but also a fantastic offer to win up to £30,000 of free rental payments for 12 months. This offers our customers a real helping hand during a time when costs are rising on a daily basis.”

Mr Choudhury continued, “Open to all faiths, the HPP is the only product in the UK whose source of funds is 100% Sharia’a compliant. IBB will not use any interest bearing instruments like bonds or derivatives to finance your home. It will instead use its own funds or the deposits from its customers, all managed purely on a Halal basis.”

The following is an example of the typical costs involved in taking out IBB’s HPP under its new rates

• Assume a property purchase price of £150,000.
• Assume you have £30,000 (20%) to pay towards the property purchase price.
• Assume you wish to spread your payments over 30 years.
• On this basis, the Bank will pay £120,000 (i.e. 80%) and you will pay £30,000 (i.e. 20%).
• Assume the rent rate is 5.49%.
• In the illustration below the rent rate is fixed for 6 months.

The example is for information purposes only and the actual figures are likely to vary.
Based on the example, your monthly payments may appear as follows:

Each monthly payment will consist of two elements:

Rent element – this is the amount that the customer is paying to the Bank as rent on the Bank’s share of the property. This is covered by the Ijara (Lease) agreement.

Acquisition element - this is the amount that the customer is contributing towards purchasing the Bank’s share in the property. This is covered by the Diminishing Musharaka (partnership) agreement.

The rent element decreases as the Bank’s share in the property decreases with each acquisition payment. Correspondingly, the equity in the property increases, (in the customer’s favour), with every payment.

The rent rate is fixed for the initial period of the Lease Agreement until either the 1st of April or the 1st of October, whichever comes first after the date of completion. Thereafter, the rent rate will be fixed for six month periods at a time and will be reviewed in March and September each year, with new monthly payments commencing one month after this date. At each Rent Review date the rent rate may increase, decrease or stay the same. The customer can buy the Bank’s share, in part or full, or sell the property at anytime without any penalty***. The Bank does not claim any share in the appreciation of the property.

Notes:

5.49% rent rate is available for re-financing deals, up to a maximum FTV (Finance To Value) of 70%. For new purchases the current rate is also 5.49%, with a maximum FTV of 80%.

There is a one-off administration fee of £299 on both products. Minimum £70,000, maximum £750,000 finance. Income from up to four people can be taken into account when assessing an application. The four people must be owner occupiers of the property being financed.

Islamic Bank of Britain plc uses an affordability criteria in which a customer’s income and expenditure are assessed.

* Prize Draw terms and conditions apply, and are available on request.

** The refinance rental rate is fixed at Base Rate + 1.49% until 31st March 2010, subject to a minimum rate of 5.49%. New purchase rate is currently Base Rate + 1.79%, subject to a minimum rate of 5.49%.

***If the fees-assisted option is taken and the customer ends the agreement within 5 years, any fees incurred by the bank, such as the valuation and legal fees, will have to be repaid.

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