HSBC has hit out at proposals in the Mortgage Market Review to ban non-advised sales for home purchase plans.
HSBC Ammanah, the Islamic finance arm of HSBC, has a fully non-advised proposition and estimates it has a 65% share of the £500m UK market.
Charging interest is banned under Islamic law so the HSBC scheme sees customers rent the property from the bank and make regular contributions to buy equity in it.
Riaz Hassan, national sales manager at HSBC Ammanah, says the MMR would have implications for both providers and customers.
He says: “We have one product, structured one way so what will we actually be advising on? That is the dilemma we and other providers face from these proposals.
“Borrowers using Islamic finance make the choice on principled reasons rather than cost.”
He adds: “When you compare it to conventional products it will always be more expensive so you will never advise someone to use Islamic finance.”
Hassan says the market could change in the coming years with more products making advice helpful but today it poses big challenges.
Kate Robinson, consultant at financial consultancy Bovill, estimates only 5% of Islamic home purchase plans are currently advised sales.
She says: “It is a major shake-up of the market and providers will see considerable changes to the way they operate.”
A spokeswoman for the Islamic Bank of Britain says: “We have no objection to making home purchase plan sales advised. We believe it will serve to raise the level of professionalism in the industry, which in turn will be beneficial to the end user.
“The MMR proposals should not significantly affect the relationship we have with intermediaries and how they can do business with us.”