Al Rayan Bank launches Scottish buy-to-let range

The bank, which established its presence in Scotland last month, is offering two-year fixed rates of 2.99% for landlords with 35% deposits and 3.39% for those with 25% deposits. It has also launched discounted variable rates of 3.19% and 3.49% respectively.

Unlike conventional buy-to-let mortgages, where the landlord borrows money from a lender and pays it back with interest, Al Rayan Bank’s customers will buy their properties using the Islamic finance principle of co-ownership (Musharaka), purchasing the property together with the Bank, as partners.

Each month they will make an acquisition payment which will increase their stake in the property. They will also pay an occupancy payment under a co-beneficiaries agreement for use of the bank’s share of the property. At the end of the finance term, when all payments have been made the customer will have sole ownership of the property and will benefit from any appreciation.

Following the fixed or discounted period, all occupancy payment rates will revert to the Al Rayan Bank Variable Occupancy Payment Rate. For BTLPP products this is currently Bank of England Base Rate (BBR) plus 4.99%.

The bank already provides Sharia compliant home purchase plans and commercial property finance in Scotland.

As an Islamic bank, Al Rayan Bank does not use any interest-bearing products to finance customers’ properties. Instead it uses the savings deposits from its customers, managed in accordance with Sharia principles.

Sultan Choudhury, chief executive of Al Rayan Bank, said: “We’re delighted to continue the momentum of our successful launch in Glasgow with the announcement of buy-to-let purchase plans for Scotland.

“Islamic buy-to-let property finance is an important addition to the Scottish market and will provide landlords with a practical alternative to conventional, interest-bearing, property finance products; one that will not compromise their values or faith.”