British Muslims facing a 'financial faith penalty' in the housing market

British Muslims are suffering a “financial faith penalty”, with 8 in 10 saying their home finance choices are restricted due to their faith, according to a new report by Islamic home finance provider, Offa.

The report challenges providers, brokers and policymakers to help build an industry where faith-aligned finance no longer means accepting slower application processes, excessive paperwork and poorer overall experiences than those available in the conventional market.

Of the 24.3% British Muslims who had used Islamic home finance, 62% had to wait up to two weeks for a finance decision, 17% waited 15 to 31 days, 16% waited more than a month and only 5% received a same-day finance decision. The three biggest challenges they faced were long decision times (28%), excessive paperwork (22.6%), and poor customer service (18.9%).

The findings also reveal that a majority of Gen Z and Millennial non-Muslims favour the ethics of Islamic finance, while 4 in 10 would consider trying Islamic home finance.

Islamic home finance firms do not charge interest and they also avoid investing in sectors deemed harmful to society such as the arms trade, animal testing, gambling, alcohol and tobacco.

Of the British non-Muslims surveyed, more than six in ten (64%) had never heard of Islamic home finance, yet a similar number (63%) also stated that they favoured its ethical principles when these were explained.

Home ownership, faith, and generational wealth

The report reveals that British Muslims share the same aspirations as any other community in the UK. The main reasons they want to own a property are to provide a stable home for their family (79.1%) and to build generational wealth and investment (18.6%). Only 2.2% stated they did not want to own a home.

They are guided by faith when it comes to finance, with the vast majority (94.2%) answering that it is important (77.1% important, 17.1% somewhat important) that their financial products align with their ethical or religious beliefs. However, only 12.8% are currently using Islamic home finance, and 11.5% stated they had in the past – leaving 75.7% who have never used Islamic home finance.

Half of the British Muslims using conventional finance felt unhappy or uneasy (50.7%) about having a conventional mortgage rather than a Sharia-compliant one because of their faith.

Sagheer Malik, chief commercial officer and managing director of home finance at Offa, said: “Property is the asset class of choice for many of the UK’s 3.87 million Muslims, both as a route to generational wealth and as a long-term financial foundation, yet our insightful research report reveals that British Muslims are being underserved and deterred by slow, outdated and opaque Islamic home finance provision.

“This is not a niche concern, in fact it goes to the heart of financial fairness and inclusion in modern Britain. Our research indicates that British Muslims both desire and deserve high quality, Sharia compliant home finance products that match mainstream standards on price, speed and simplicity. There is no reason why we should not offer equivalent modern products and systems driven by the latest technology, which is what we at Offa are delivering.”