This was reflected in Mortgage Solutions’ latest reader poll, which asked: ‘How much Shariah-compliant business do you place a year?’
An overwhelming 89 per cent of respondents said they place no cases in a year, while 5.5 per cent place one to ten and 5.5. per cent place more than 20. No respondents said they place 11-20 Shariah-compliant mortgages per year.
Dependent on client pool
While some of the brokers we spoke to didn’t handle any Shariah-compliant mortgages and others placed a few, they all agreed that the low numbers cited by respondents reflected their own business volumes.
James Chisnall, director of City Finance Brokers, said his business hadn’t dealt with any Shariah mortgages but noted that because many of his clients were gained through referrals, there was a chance that pools of clients who needed this kind of business would likely be concentrated among certain brokerages.
“I’ve been doing this for 24 years and most of my client banks can be traced back to one or two individuals as they’ve all been referred. People who have done a Shariah-compliant mortgage might then refer someone else who refers someone else, and next thing [a broker’s] client bank is needing that kind of product,” he said.
Lack of demand
Despite the low number of cases placed, all the brokers said they wanted to and attempted to offer Shariah mortgages but found demand was not often there.
Chisnall said he had had lenders come to his firm to speak about the products but found there was no interest among his clients while Lilla Dilliway, mortgage and protection adviser at BlueWing Financials, said despite having the permissions to place cases and mentioning it to clients, they still opted for mainstream products.
Of those she suggested Shariah mortgages to, Dilliway said: “One client hasn’t had an offer accepted on the property that he wanted; he’s still looking so it might come to something.
“There was someone else who said it wasn’t something he was looking to do, he just wanted a mainstream mortgage, and in another case the client said it was more expensive than a mainstream mortgage even though he liked the sound of it,” she added.
Mike Owen, director of compliance and marketing at Diverse Advisers, said the low demand put him off gaining the permissions to advise on Shariah mortgages.
“It really is a long drawn out process. I did start it once, because we had a case, but to be honest the cost and hassle of gaining the permissions outweigh the very odd Shariah case we’ve been asked to place.”
Owen said he also had a bank come in to promote the offering but was yet to see any interest, however, he does introduce Shariah-based cases for a lender who does the compliance work and gives Owen’s firm an introducer’s fee.
As for those who are able to advise on Shariah mortgages, Dilliway said acquiring the permissions had not “paid off” as she had not placed any cases. However, she acknowledged it was still useful to have in case her firm ever did decide to focus on the offering.
A niche market
The only broker Mortgage Solutions spoke to who had placed Shariah-compliant cases said he found it tended to be an option for his buy-to-let clientele.
Steve Jackson, owner of Jackson Potter Mortgage Brokers, said his firm did not see much interest for the product, completing just half a dozen cases in 2019.
“A lot of them are investors and looking to invest in that compliant manner, hence why that’s our niche,” he added.
It was also pointed out that the part-rent, part-capital repayment aspect of a Shariah mortgage meant even where borrowers were interested, they were not always eligible based on affordability or credit history.
Jackson said: “In my experience, a lot of people have gone down the route of applying for a Shariah mortgage and ultimately, for whatever reason have not been able to get there and it’s been declined.
“When they’re rejected, they go back to the mainstream market and perhaps return in a couple of years to see if they would be accepted by a Shariah-compliant lender.”
Dilliway suggested in the same way there is a lack of general public knowledge around mainstream mortgages, demand was possibly low as applicable borrowers would not be aware that a Shariah-compliant mortgage was a possibility, especially in the UK.
“Shariah mortgages are not advertised or promoted in the same way. If there was more awareness, we might see an increase in take up,” she said.
Akhil Mair, ,managing director and specialist mortgage broker at Our Mortgage Broker, agreed as he said: “The demand – and more importantly the actual product – is not widely marketed nor something that every comes in conversation. I cannot see a change in the short term, but property changes on a daily basis, so watch this space.”