Almost half (45%) of UK homebuyers would consider using an ethical finance provider that follows Islamic principles, finds Gatehouse Bank.

• Over 1 in 3 (37%) UK homebuyers said they would be most attracted to a Shariah-compliant provider because funds aren’t invested in unethical industries
• Nearly three quarters (72%) of 18–24-year-olds said they would consider a Shariah-compliant provider
• Research coincides with product changes to Gatehouse Bank’s Home Purchase Plans (HPP)*, including rate reductions** of between 0.65% - 1.00% and the launch of a 95% FTV*** product for financing of up to £500,000

Gatehouse Bank, a Shariah-compliant UK challenger bank, has published new data revealing that nearly half (45%) of UK homebuyers would consider using an ethical home finance provider that aligns with Islamic principles.

The research showed that UK homebuyers are looking to make financial decisions that reflect their ethical commitments, with over two thirds (69%) of respondents noting the importance of green and sustainable options when purchasing their home. In line with this, over a third (37%) of UK homebuyers are most attracted to Shariah-compliant home finance providers because they do not invest in unethical industries such as tobacco, gambling, alcohol, adult entertainment, and the arms industry.

Today’s research coincides with several changes to the Bank’s Home Purchase Plans, including rate reductions of between 0.65% - 1.00% across Gatehouse’s range of products, which are available to UK residents, UK expats and international residents.

As part of this re-price, the Bank has introduced a new 95% FTV product, which is open to all qualifying applicants, including first-time buyers and home movers. The new product has been launched in line with the research’s findings that 4 in 10 (40%) of UK homebuyers set aside a deposit of 5-10% when purchasing a home.

The Bank’s 95% FTV product carries a maximum finance limit of £500,000, while for 90% FTV products, the maximum finance limit has increased to £600,000. For other products, the maximum finance limit has increased from £1 million to £5 million, with specific thresholds of 80% FTV for up to £2 million, 75% FTV for up to £3 million and 70% FTV for up to £5 million.

A rate reduction of 0.65% has been applied to the Bank’s Buy-to-Let products, which include Houses in Multiple Occupation (HMO) and Multi-Unit Freehold Blocks (MUFB).

Gemma Donnelly, Head of Direct Home Finance at Gatehouse Bank, commented: “Today’s rate reductions and the launch of our 95% FTV product have been designed with the research in mind, which revealed that 4 in 10 (40%) UK homebuyers allocate a deposit of between 5-10% when purchasing a home.

“We aim to make our ethical, Shariah-compliant products accessible to all, and hope our customers will make the most of our offering. Our green home finance products offer a reduced rental rate for customers purchasing a home with an energy efficiency rating of A or B, with Gatehouse Bank offsetting the carbon emissions generated by the average UK property for as long as the customer remains with the Bank with a qualifying property. This was an important provision for nearly half (48%) of respondents, who said they would opt for a provider who offered incentives for buying a property with a higher EPC rating.”

Generational differences

While the findings showed an overall willingness amongst UK consumers to explore ethical home finance products, younger generations were most familiar with Islamic finance. Nearly three quarters (72%) of 18–24-year-olds said they would consider a Shariah-compliant provider, compared to just a quarter (26%) of those aged 65 and above who said the same.

This was due to a persistent knowledge gap between generations, with 36% of those aged 65 and over remaining unaware that Islamic finance products are available to all, including those of all faiths and none. However, awareness of Shariah-compliant products is growing overall, with less than a quarter (22%) of all respondents saying the same.

Lottie Dougill, Head of Intermediary Sales at Gatehouse Bank, commented: “It’s fantastic to see growing awareness of Shariah-compliant finance amongst consumers, particularly in younger generations, with nearly half (47%) of 18-24-year-olds keen to align their financial goals to their ethical beliefs.

“However, there is still work to be done by finance providers and brokers alike. It is important to continue addressing any lingering misconceptions around Shariah-compliant finance and thus closing any potential knowledge gap so that homebuyers are aware of all their options and can take advantage of the benefits that Islamic finance has to offer.”

A full list of Gatehouse Bank’s Home Purchase Plans is available here, while a list of its Buy-to-Let products is available here.

This survey was commissioned by Gatehouse Bank and carried out by 3Gem. The research anonymously surveyed 1,000 nationally representative UK homeowners and prospective buyers over the age of 18 between 12th – 14th March 2024. The research assessed respondents’ attitudes towards ethical finance products, asking them to identify how important it is that the method of purchasing a home aligns with Islamic principles, is sustainable and ethical, with subsequent questions analysing what elements of ethical finance products attract the respondents as well as their awareness.

*A Home Purchase Plan is a Shariah-compliant alternative to a mortgage.

**As a Shariah-compliant Bank, Gatehouse charges rental rates rather than interest rates, which reflect the shares the customer owns of the property.

***Finance to Value (FTV) is the amount of finance expressed as a percentage of the property valuation, which may be referred to as Loan-to-Value (LTV) in conventional finance.