By Sakeeb Zaman, CEO, StrideUp
Buying a home can be a deeply personal journey for many people, a moment that represents various different milestones. Yet the UK housing market continues to kick up challenge after challenge for plenty of buyers.
One area that’s frequently overlooked by the industry is the demand for financial products that align with personal beliefs and values. But Islamic finance is leading the charge for change, and brokers that fail to respond risk missing the opportunity to serve a growing, values-conscious market.
How is the housing market missing the mark?
Persistent challenges across the market, like strained supply and unaffordable rates, leave prospective buyers feeling locked out. In fact, 40% of young adults cannot afford to buy one of the cheapest homes in their area, even with a 10% deposit.
Around 7% of the UK population identifies as Muslim, yet only a very small proportion of them have been able to access home finance that aligns with their faith needs. Conventional mortgage products might work for the majority, but that still leaves a considerable percentage of the UK population locked out of home ownership. Islamic home finance, while not a new concept in its entirety, has often been overlooked due to perceived complexities and outdated notions. Now, a new wave of Islamic fintech is disrupting the market and bringing shariah-compliant products to the modern banking standards that the general consumer expects.
With a CAGR of 11%, the Islamic finance industry is showing how quickly people’s opinions are changing. Even beyond the Muslim population, more people are exploring Islamic finance than ever before. This is because for some profiles it’s more accessible than conventional products – for example, some providers makes it easier for intermediaries’ clients to get on the property ladder by allowing family supported applications – with criteria allowing gifted deposits, and income from up to four applicants being taken into account.
Islamic finance steps into the fore
Islamic home finance avoids interest and instead uses a partnership-based structure. The customer and provider buy the property together, and the customer gradually purchases the provider’s share over time. Profit is generated through rent on the portion of the property the homeowner doesn’t own, rather than interest.
Flexibility also plays a key role here. Some Islamic finance providers allow a wider range of applicants than conventional lenders, which is helpful for households with multiple contributors or non-standard income. From a broker’s perspective, what really makes a difference is that Islamic providers take the time to work through a case with them and the applicant. Instead of a rigid ‘computer says no’ response, brokers find the process far more collaborative, with underwriting that looks for a solution rather than a reason to decline. Islamic finance is a solution that recognises the reality of modern living arrangements and works to make home ownership more accessible, not less.
Brokers need to react to this quickly scaling market
Financial centres across the world are expanding their offerings as demand grows. Countries in the Middle East and Southeast Asia have already established large, sophisticated markets, while Europe is now seeing stronger adoption among buyers searching for alternatives to conventional interest-based systems.
Advisers are also finding that providers differ from the traditional Middle Eastern banking subsidiaries that have historically dominated this space. Instead of leaning on older, less flexible models, some providers have built a more modern, digital approach that is closely connected to the needs and expectations of UK customers, making it easier for brokers to support clients who want an ethical alternative without an added layer of complexity. This momentum is proof that alternatives to conventional lending can thrive when they address real problems, meet regulatory standards and respect customer values and faith.