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Regulation of Financial Services (Land Transactions) Bill

The hon. Gentleman understands that we cannot introduce retrospective legislation, but we sympathise with people who find themselves in such circumstances. If is incredibly difficult to help people if those transactions were perfectly lawful, even if they have had unintended consequences. The hon. Gentleman mentioned Barclays bank, and if he feels that it has behaved unreasonably, he should take the matter up directly with its senior management on his constituents’ behalf. Two main types of home finance products are currently aimed at meeting the religious needs of Muslim consumers in the UK. The first, murabaha, involves a financial institution purchasing the chosen property and then selling it immediately to an individual at a higher price. The higher price is then paid back on a monthly basis to the financier over a period of up to 15 years. Those products are already covered by FSA regulation. The second type, ijara, involves a financial institution purchasing the chosen property, at which point the individual agrees to pay back the exact purchase price either over a period of up to 25 years or at the end of the payment term. Ownership of the property remains with the lending institution until the payment term is up. The individual pays rent to the financial institution over the payment term and becomes the owner of the property once the purchase price paid by the financial institution is repaid. The financial institution makes its profit from the rent paid, which is seen as a fair payment for use of the property rather than a charge for borrowing money. That arrangement is not currently covered by FSA regulations.