Halal home financing options in the UK

A steady path to faith-aligned homeownership

The UK is now one of the world’s most active hubs for Islamic finance, with the domestic market valued above £6 billion and growing. Five fully fledged Islamic banks operate here, and more than 20 conventional banks offer Islamic options. For homebuyers, that means practical, regulated routes to purchase without interest, using structures designed to be Sharia-compliant and ethically screened.

Halal home finance typically replaces interest with a partnership or lease model, known as a Home Purchase Plan. Providers share ownership and you pay rent plus an amount that gradually increases your share, until you own the property outright. It is simple in principle, yet the details matter. Costs, fees and eligibility criteria vary by lender, and the market is evolving quickly as new funding, digital onboarding and supportive tax reforms improve access and pricing.

Gatehouse Bank and StrideUp currently stand out. Gatehouse supports Home Purchase Plans up to 95% of the property value and up to £5 million, including green incentives for energy-efficient homes. StrideUp has expanded with a £280 million funding line to support around 1,000 more customers, with recent rate reductions that close the gap to traditional mortgages. Surveys suggest that around 45% of UK homebuyers would consider Sharia-compliant providers, including many non-Muslims who value ethical screens that avoid sectors like alcohol and gambling.

The wider picture is equally encouraging. Islamic banking assets in the UK have climbed sharply year on year, retail customer numbers have grown strongly, and London remains a global centre for sukuk listings. Government policy has helped level the playing field over time, with recent Capital Gains Tax and Annual Tax on Enveloped Dwellings changes removing impediments that once made halal options less competitive. While halal plans can still cost more due to limited competition and structuring, increased scale and fintech innovation are steadily improving value.

No jargon, no pressure. Just clear, practical steps to help you choose a halal route that fits your budget and values.

Standout fact: Only a few thousand Islamic mortgages are currently outstanding in the UK - so today’s buyers are entering a market with significant room to grow.

Who benefits most from this guidance

If you want to buy a home in the UK without paying or receiving interest, this guide is for you. It will suit first-time buyers who need a clear explanation of halal alternatives, movers seeking larger properties, and high-net-worth buyers exploring larger facilities. It also speaks to ethical consumers who are drawn to value-based finance, even if they are not Muslim. If you prefer steady, transparent explanations over sales talk, you will feel at home here.

Your main halal routes today

1. Diminishing Musharaka Home Purchase Plan - you co-own with the provider and gradually buy out their share while paying rent on their portion.
2. Ijara Home Purchase Plan - the provider buys the property and leases it to you, with a parallel purchase plan for eventual ownership.
3. Shared Ownership with halal financing - combine a housing association share with an HPP for your portion.
4. Green-focused HPPs - preferential pricing or incentives for higher EPC-rated homes.
5. Digital-first providers - streamlined onboarding, quicker approvals and app-based management.

Cost, impact, returns and risks at a glance

Who is likely to qualify

Eligibility looks similar to conventional lending, with a few differences. Providers assess income, outgoings, credit history and property suitability. Expect affordability checks based on rental rates rather than interest, plus verification that the property has clear title and acceptable construction. Minimum deposits can start around 5% for select products, though 10% to 20% remains common for broader choice and sharper pricing. Maximum property values can reach £5 million with certain lenders, subject to stricter underwriting.

If you are self-employed, be ready with two to three years of accounts or SA302s. Some digital-first providers may look at bank data directly for faster assessments. Buy-to-let options exist in the market but are more specialist. Energy-efficient homes may attract better terms under green criteria. Exclusions can include properties with significant commercial use, non-standard construction or short lease lengths. If you are comparing multiple offers, ensure total cost transparency, including all arrangement, legal and valuation fees. If you are using a broker platform like Kandoo to explore options, ask for a side-by-side breakdown so you can compare like for like.

Step-by-step: from enquiry to keys

1. Check affordability and set a realistic budget.
2. Gather ID, income proofs and bank statements.
3. Get a decision in principle before property viewings.
4. Choose HPP type and initial term length.
5. Instruct solicitors experienced in halal structures.
6. Complete valuation and property due diligence.
7. Review documents, fees and legal undertakings carefully.
8. Sign, pay deposit, complete and receive keys.

Pros, cons and practical considerations

Before you commit

Take time to model several scenarios. Compare fixed and variable terms, and test how a 1 to 2 percentage point rise in rental rates affects your monthly budget. Ask for a full illustration of costs over the initial term and to completion, including legal and valuation fees. Clarify early settlement rules and any fees for part-redemptions. If you plan to move within a few years, check whether your plan is portable. Finally, read the Sharia Supervisory Board’s summary so you understand how the product is monitored and where exclusions apply.

Alternatives worth weighing

1. Conventional repayment mortgage with an ethical bank or building society.
2. Shared Ownership via a housing association without halal finance.
3. Rent-to-own schemes offered by local providers.
4. Save a larger deposit to reduce monthly outgoings and fees.
5. Remain renting while monitoring pricing improvements in halal plans.

Common questions answered

Q: Are halal Home Purchase Plans regulated in the UK? A: Yes. HPPs are typically regulated by the Financial Conduct Authority. Still, always check that both the firm and the specific product are authorised before you proceed.

Q: Do halal plans cost more than a standard mortgage? A: Sometimes. Limited provider numbers and structural costs can lift pricing. The gap has narrowed as funding has grown and digital processes improve efficiency.

Q: What deposit do I need? A: Some providers offer up to 95% financing, though 10% to 20% deposits often unlock better rates and wider eligibility. Higher energy ratings can also help with pricing.

Q: Which providers are active right now? A: Gatehouse Bank and StrideUp are prominent, with strong capacity and recent funding. Several other banks and fintechs also offer Sharia-compliant options in the UK.

Q: How secure is the UK market for halal finance? A: The UK hosts a leading sukuk listing centre, a growing retail base and supportive tax reforms. Market size is expanding steadily, indicating long-term stability.

Q: Can non-Muslims use halal finance? A: Yes. Many customers choose halal options for ethical reasons, including sector exclusions and transparent structures.

What to do next

If you are ready to compare options, share your budget and documents with a trusted broker. Kandoo can help you explore regulated, Sharia-compliant providers side by side, clarify true total costs and timelines, and guide you through the paperwork so you can move forward with confidence.

Important information

This guide provides general information, not personal advice. Halal home finance may not suit every situation. Always check provider authorisation, read all documents and seek independent financial and legal advice before committing.