Are Islamic mortgages more expensive?
In the products and tiers we could directly benchmark, yes, and here is the size of the gap. At 90% finance-to-value on a two-year fixed, Gatehouse's products effective sit 1.31 to 1.41 percentage points above the Bank of England's July 2026 quoted-rate series for a conventional two-year fix at the same loan-to-value, which was 5.07%.
That is a gap against a competitive market benchmark, not a fee-matched comparison against one specific mortgage. The rest of this page is the working, including the parts of buying a home that are not made more expensive by Islamic finance. This page answers what the difference costs; what the two arrangements actually are, from who owns the property to which protections attach, is a separate question answered in Islamic vs conventional.
What we measured, and what we refused to
A rate gap is only a finding when both numbers describe the same thing at the same time. We matched published Islamic products to the Bank of England's conventional quoted-rate series only where the finance-to-value, the fixed period and the customer type all align, and then matched the observation period as closely as the source data allows.
That produced 9 comparisons from 26 priced UK-resident products, and excluded 17. The exclusions are the important half, and they fail for two different reasons: 15 are fixed-rate products at a finance-to-value the Bank does not publish a band for, and 2 are variable-rate products, which have no fixed-period counterpart in the series at all.
- Vintages are never mixed
- Offa's 90% products are effective and Gatehouse's . Measuring both against one July benchmark would have captured nearly four months of market movement on Offa's side and reported it as a difference between providers. Each is matched to its own month, and the two are presented as separate analyses rather than averaged.
- Tiers without a benchmark are absent
- The Bank publishes 60%, 75%, 85%, 90% and 95% loan-to-value. Our providers publish 65%, 80%, 90% and 95%. Only two overlap, so 15 fixed-rate products at 65%, 80%, 90% are not compared here at all. That includes the 80% tier, where our own deposit research found the largest step in the Islamic ladder: that is a finding about Islamic pricing, not about Islamic versus conventional.
- What the benchmark is
- Monthly aggregates of advertised rates from UK banks and building societies, weighted by business volumes. Where several of an institution’s products qualify, the Bank selects that institution’s most competitive qualifying product, and rates are selected as the lowest available at 60%, 75%, 85%, 90% and 95% loan-to-value. Those per-institution observations are then aggregated and weighted, so the published figure is a weighted market benchmark rather than the single cheapest mortgage available in Britain. Product fees and cashback are considered when deciding which product is most competitive, but are NOT incorporated into the published rate, so a total conventional cost cannot be derived from it.
The rate gap, by vintage
Two independently dated analyses. Read them separately; there is no single current figure for the market, and averaging these would produce one that describes nothing.
Gatehouse Bank against the July 2026 benchmark
| Product | Finance-to-value | Fix | Islamic rate | Benchmark | Gap | Vintage |
|---|---|---|---|---|---|---|
| Gatehouse Bank Green Fixed 2yr GHFU1738 EPC A or B required | 90% | 2y | 6.38% | 5.07% | +1.31 | Near-contemporaneous |
| Gatehouse Bank Fixed 2yr HFU1742 | 90% | 2y | 6.48% | 5.07% | +1.41 | Near-contemporaneous |
| Gatehouse Bank Green Fixed 2yr GHFU1739 EPC A or B required · purchase only | 95% | 2y | 6.68% | 5.49% | +1.19 | Near-contemporaneous |
| Gatehouse Bank Fixed 2yr HFU1743 purchase only | 95% | 2y | 6.78% | 5.49% | +1.29 | Near-contemporaneous |
| Gatehouse Bank Green Fixed 5yr GHFU1741 EPC A or B required · purchase only | 95% | 5y | 6.66% | 5.29% | +1.37 | Near-contemporaneous |
| Gatehouse Bank Fixed 5yr HFU1745 purchase only | 95% | 5y | 6.76% | 5.29% | +1.47 | Near-contemporaneous |
Benchmark: Bank of England series IUMB482, IUM2WTL, IUM5WTL, July 2026 observation, published . Islamic rates effective 6 August 2026.
Offa against the April 2026 benchmark
| Product | Finance-to-value | Fix | Islamic rate | Benchmark | Gap | Vintage |
|---|---|---|---|---|---|---|
| Offa Fixed 2yr 90% | 90% | 2y | 6.60% | 5.46% | +1.14 | Same month |
| Offa Fixed 2yr 95% | 95% | 2y | 6.90% | 5.81% | +1.09 | Same month |
| Offa Fixed 5yr 95% | 95% | 5y | 6.88% | 5.63% | +1.25 | Same month |
Benchmark: Bank of England series IUMB482, IUM2WTL, IUM5WTL, April 2026 observation, published . Islamic rates effective 14 April 2026.
What the gap is not
It is not the difference between two mortgages you could hold in your hand. The Bank's series takes the most competitive qualifying product at each loan-to-value across its reporting institutions and weights the result by business volumes. A specific conventional mortgage available to a specific borrower may sit above or below it.
What the gap costs, on stated assumptions
Modelled on a £250,000 property over a 25-year term, on an amortising basis, holding everything constant except the rate. This isolates the effect of the rate. It is not a total cost comparison, for the reason in the next section.
Each row is priced against its own benchmark month, shown in the last column. Gatehouse is measured against July and Offa against April, because that is when their rates took effect. Do not read down the difference column as a provider ranking: those two figures answer questions asked four months apart.
| Product | Finance | Monthly, Islamic | Monthly, benchmark | Difference | Over the fixed period | Benchmark |
|---|---|---|---|---|---|---|
| Gatehouse Bank 90% 2y | £225,000 | £1,502 | £1,325 | £178 | £4,269 over 24 months | July 2026 |
| Gatehouse Bank 90% 2y | £225,000 | £1,516 | £1,325 | £192 | £4,605 over 24 months | July 2026 |
| Gatehouse Bank 95% 2y | £237,500 | £1,630 | £1,457 | £173 | £4,161 over 24 months | July 2026 |
| Gatehouse Bank 95% 2y | £237,500 | £1,645 | £1,457 | £188 | £4,521 over 24 months | July 2026 |
| Gatehouse Bank 95% 5y | £237,500 | £1,627 | £1,429 | £199 | £11,917 over 60 months | July 2026 |
| Gatehouse Bank 95% 5y | £237,500 | £1,642 | £1,429 | £214 | £12,815 over 60 months | July 2026 |
| Offa 90% 2y | £225,000 | £1,533 | £1,376 | £157 | £3,767 over 24 months | April 2026 |
| Offa 95% 2y | £237,500 | £1,663 | £1,503 | £161 | £3,858 over 24 months | April 2026 |
| Offa 95% 5y | £237,500 | £1,660 | £1,477 | £184 | £11,011 over 60 months | April 2026 |
A modelled payment difference attributable to the rate, not a total premium. Home purchase plan payments are rent plus acquisition rather than interest plus capital; the amortising model is used because it holds the arithmetic identical on both sides, which is what isolates the rate. Price your own figures on the calculator.
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Why fees are not in that number
Because they cannot be, honestly. The Bank of England considers product fees and cashback when deciding which conventional product is most competitive enough to enter the series, but it does not incorporate the fee into the published rate. There is therefore no conventional fee in the benchmark to compare our providers' fees against, and inventing a representative one to make the table look complete would be the sort of number that is wrong for every reader.
What we can say is what the Islamic side charges, and it is on the process page and the comparison: product fees on the 90% products in this analysis are £999, and Gatehouse states fees cannot be added to the finance amount.
What is not an Islamic finance premium
This is where most of the anxiety sits, and most of it is misplaced. These costs are the same whichever route you take.
- A second stamp duty bill
- A home purchase plan involves the provider acquiring the property or an interest in it, which looks like a second taxable transaction. HMRC provides a specific relief for alternative property finance so that it is not. Its manual states the effect: the stamp duty land tax payable is in line with that which would be payable if a property was purchased using a conventional mortgage product.
- The deposit
- Your deposit is the same money whichever route you take. On a home purchase plan it becomes your opening ownership share rather than the part of the price a lender is not lending, but the amount you have to find is decided by the tier, not by the structure.
- Ordinary property tax
- Stamp duty, Land Transaction Tax and Land and Buildings Transaction Tax follow the purchase, not the finance. A first-time buyer pays what any first-time buyer pays.
- Survey and moving costs
- Neither is charged by the finance provider and neither changes because the finance is Sharia-compliant.
- The conveyancing that any buyer needs
- The searches, the enquiries and the registration happen on any purchase. What can differ is the arrangement: one provider states a single solicitor acts for both sides, another that you and the provider each have one and you pay both. That difference is real and belongs in the next section.
On stamp duty: HMRC, SDLTM28005, read .
Costs that can genuinely be higher
- The published rate
- Measured below against a named conventional benchmark, at the tiers where a benchmark exists.
- The product fee
- Published per product, and comparable only against a specific conventional product rather than against the benchmark series, which does not carry a fee.
- Legal process costs where the provider imposes them
- StrideUp publishes that you and StrideUp each have your own solicitor and that you pay for both. That is a structural cost a conventional purchase would not carry.
- The deposit tier you land on
- A finding about the Islamic ladder rather than about Islamic versus conventional: crossing 80% finance-to-value costs 0.7 to 0.8 points and doubles the product fee. It is on the deposit page and is not part of this comparison.
Common questions
- Are Islamic mortgages more expensive than normal mortgages?
- On published rates at the tiers we can benchmark, yes. Gatehouse’s two-year fixed products at 90% finance-to-value, effective 6 August 2026, sit 1.31 to 1.41 percentage points above the Bank of England’s July 2026 quoted-rate series for a two-year fixed conventional mortgage at the same loan-to-value. That is a gap against a competitive market benchmark, not a like-for-like product comparison including fees.
- Why is the comparison only at 90% and 95%?
- The Bank of England publishes quoted rates at 60%, 75%, 85%, 90% and 95% loan-to-value. Our providers publish tiers at 65%, 80%, 90% and 95%. Only 90% and 95% appear in both, so those are the only tiers where a like-for-like comparison is possible. We do not stretch the benchmark to cover the others.
- Do you pay stamp duty twice on an Islamic mortgage?
- Normally not. HMRC provides relief for qualifying alternative property finance so that the provider acquiring the property does not create a second charge, and states that the result is in line with a conventional mortgage purchase.
- Does the gap include fees?
- No, and it cannot. The Bank of England considers product fees when deciding which conventional product enters its series, but does not incorporate the fee into the published rate. A total conventional cost cannot be derived from it, so we do not invent one.
Where to go next
Price it on your figures · The deposit research · Compare providers · How we check every figure