The bank submitted its applications to the Financial Conduct Authority (FCA) before the Christmas period last year, and has since had a series of “very positive conversations” with the regulator.
Charles Haresnape, chief executive officer of Gatehouse Bank, said that he hoped to receive approvals for its Sharia-compliant home finance range by April and “kick off into the market”.
“The conversation with the regulator has gone very positively, but we need to wait for their decision-making process to come through,” said Haresnape.
Sharia finance differs from conventional mortgages in that they do not feature interest. Instead of borrowing money from a lender which is repaid with interest, Sharia-compliant mortgages involve monthly payments that consist of an acquisition payment to increase the customer’s stake in the property, and a rental payment to allow the use the share of the home owned by the bank.
A market of opportunity
Once the products are officially launched, distribution will initially target those intermediaries in areas with denser Muslim populations, as well as overseas investors interested in UK property.
“It’s not the whole broker market – because a lot of brokers don’t have clients who’d want this kind of facility,” Haresnape continued.
“Rather than a scattered approach, we’re trying to be more targeted in the type of broker who might need this kind of service.”
He added that Gatehouse has already started talking to several networks and clubs with brokers with those needs.
Moreover, Gatehouse is “very actively” pursuing a direct-to-borrower line, and estimated that it will be launched by April.
“We always see the broker distribution being the vast majority of what we do, but there’s no reason why we can’t offer a direct proposition who don’t actually want to use a broker,” said Haresnape.
“But I don’t see the direct vs. intermediary tension,” Haresnape added, “Because in the market we’re looking at, there are definitely people we come across that want to deal directly with the lender – so we don’t see any competition at all, really.”
According to Haresnape, the Muslim population – currently at an approximate 3m – is the fastest growing sector in the UK.
He said this represents a “market of opportunity” for Gatehouse – especially as a large proportion of the demographic are in the working age bracket.
“It’s a small proportion [of the total UK population], but very fast growing,” said Haresnape.
The anticipated move into home finance is the latest strategic move for Gatehouse since Haresnape joined in May 2017.
The executive board was reshuffled in July 2017, and the buy-to-let arm of the bank was reignited after a period of “dormancy” as part of an effort to foster a comprehensive presence in the home ownership space.
A new processing centre was also opened in Milton Keynes earlier this January to support the expansion effort, while a purpose-built mortgage system for Sharia finance will be rolled out this February.
Haresnape continued: “We’re not seeking to convert everyone into a Sharia-requiring customer.
“But what we’re trying to say is – we’re going to be a serious player in a growing market where there are very few lender competitors, and where people actually want Sharia finance.”