What is a Home Purchase Plan (HPP)?
A home purchase plan is a regulated arrangement in which a provider buys your property, or a share of it, and you buy that interest back over an agreed period while living in the home. The mainstream UK-resident Islamic products we compare are all home purchase plans. The wider market also contains products that can sit within the regulated mortgage regime instead.
What a home purchase plan actually is
In the UK, a Home Purchase Plan is a regulated category of home finance arrangement, usually shortened to HPP, in which the provider takes an ownership interest in the property rather than lending you money against it. You occupy the home from the start. Over the term you acquire the provider's interest, and until you have acquired all of it you pay rent on the part you do not own. There is no borrowing and no interest in that contract, which is why UK providers use the structure for Sharia-compliant home finance.
The category itself is not a religious one. The FCA addresses this directly: asked whether home purchase plans are limited to arrangements designed to comply with Islamic principles, its guidance answers that there is nothing in the definition to suggest that, while noting that the definition is primarily directed at arrangements of that kind. A home purchase plan is a legal category, not a certification. The Islamic products we track use that category to finance a home without an interest-bearing loan, and whether a given product is Sharia-compliant is a question for the provider's own scholars, not for us.
Source: FCA Handbook, PERG 14.4 Q24, read on .
The category exists in law rather than in marketing alone. Entering into a home purchase plan as provider, and administering one, are regulated activities under the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001. Article 63F sets out what counts as one. A firm carrying on that activity needs permission for it, and the arrangement carries the protections described further down this page.
The distinction that matters
With a mortgage, you own the property and the lender holds a charge over it. With a home purchase plan, the provider holds an ownership interest and you acquire it. The monthly payment does a similar job. The contract underneath it is a different one, and so are some of the consequences at the end of the term.
The legal test for a home purchase plan
Three conditions have to be met at the point the arrangement is entered into, with a fourth that applies only in certain cases. They come from article 63F(3)(a) of the Regulated Activities Order, and they are worth reading because they explain several things providers do that otherwise look arbitrary, including why occupancy is asked about and why buy-to-let versions are treated differently.
| Condition | What the Order requires |
|---|---|
| The provider buys the property | The home purchase provider buys a qualifying interest, or an undivided share of one, in UK land that is not timeshare accommodation. |
| You are obliged to buy it back | The arrangement obliges the home purchaser to buy the interest the provider bought, over the course of or at the end of a specified period. |
| At least 40% is intended as your home | The purchaser, a beneficiary of the trust or a related person is entitled to occupy at least 40% of the land as a dwelling during that period, and intends to do so. |
The condition that applies only sometimes
Where an undivided share is bought rather than the whole interest, that share is held on trust for the provider and the purchaser as beneficial tenants in common. This applies to co-ownership arrangements, which is most of the mainstream UK market, but it is not a condition every home purchase plan has to meet.
Source: Regulated Activities Order 2001, article 63F, read on .
What this means: the category is built around a home you or a related person intend to occupy, so an ordinary buy-to-let arrangement is not a home purchase plan simply because it uses an Islamic structure.
The 40% occupancy condition is the one readers trip over. It is a floor, not a target: it allows a home to be partly let or partly used for business while the arrangement remains a regulated home purchase plan. If you intend to let the whole property, you are not looking at this category at all, and the consumer protections below do not apply in the same way.
The structures UK providers actually use
5 structure families appear in the UK market we track, and some providers use more than one. Kuwait Finance House publishes both an ijara arrangement and a commodity murabaha one, so a provider name can appear on two rows. The names come from the contracts rather than from marketing, and what changes materially between them is who holds legal title, and whether the arrangement is a home purchase plan at all.
| Structure | How it works | Used by | Regulatory category |
|---|---|---|---|
| Diminishing musharaka with ijara | You and the provider co-own the property. You buy out its share in instalments and pay rent on the share you do not yet own. | StrideUp, Offa | Generally a home purchase plan |
| Acquisition and rent | The provider buys the property and you acquire it over the term, paying rent on the outstanding portion. | Gatehouse Bank | Generally a home purchase plan |
| Ijara | A lease. The provider owns the property and you lease it, with an arrangement to acquire ownership. | Kuwait Finance House PLC | Generally a home purchase plan |
| Commodity murabaha, also called tawarruq | No property sale happens between you and the provider. The provider buys metal commodities, sells them to you at a marked-up deferred price, and the commodities are sold on to raise the cash you use to buy the property. You own the home from the outset and the provider takes security over it. | Kuwait Finance House PLC, Al Rayan Bank Premier Home Finance, Nomo by BLME | Not a home purchase plan on these mechanics |
| Property murabaha | The provider buys the property and sells it to you at a disclosed mark-up, payable in instalments. Legal title passes to you, with a charge over the property. | None currently tracked | Depends on the contract; classification not established by us |
| Murabaha, variant not established | The provider publishes a murabaha structure without stating whether the sale is of the property itself or of commodities. The two work differently, and we have not verified which applies. | QIB (UK) plc | Not established by us |
What this means: under a commodity murabaha the provider need not become a co-owner of your home at all, which is the clearest practical difference between the two halves of this table.
Diminishing musharaka is the most common in the mainstream UK market. You and the provider own the property together, your share grows with each acquisition payment, and the rent you pay falls as the provider's share shrinks. Acquisition and rent reaches the same end by a slightly different route. Both are generally home purchase plans.
Not every Islamic home finance product is a home purchase plan
This is the most useful thing on the page, and the part most comparison sites skip. Islamic mortgage is a marketing phrase covering several different legal arrangements. Diminishing musharaka, acquisition and rent, and ijara arrangements are generally home purchase plans. Some murabaha structures, where legal title passes to you at the outset and the provider takes a charge, instead fall within the regulated mortgage regime.
Of the 7 active retail propositions in our provider register, 4 use or include murabaha-based home finance. That matters when you compare products, because the two regimes carry different documentation, different disclosure and, at the margins, different consequences. We record what each provider states about its own product and never infer a regulatory category from a structure name.
What we could not verify
We hold no independent confirmation of the regulatory classification of each individual product. Providers state their own position, and we publish that statement rather than our reading of it. Our register therefore refuses to treat a structure name as a classification, and our routing rules block any commercial referral for a proposition whose category we have not established from a source.
How a home purchase plan differs from a mortgage in practice
Day to day, less than you would expect. You make one monthly payment, you can usually overpay, and the product comes in fixed and variable flavours with an early settlement charge during the initial period. The differences that show up in the paperwork are ownership, the name of the rate, and what happens when the initial period ends.
| Feature | Home purchase plan | What we hold |
|---|---|---|
| Who owns the property | The provider holds an ownership interest that you acquire over the term | All 3 mainstream providers |
| What the payment is called | Rent on the share you do not own, plus acquisition payments | 2 rate types published: Fixed, Discounted variable |
| Term | Set at the outset, as with a mortgage | 5 to 40 years; 7 to 40 years |
| What happens after the initial period | You move to a follow-on rate unless you switch product | Published follow-on rates: SVR 7.25%, Follow-on 7.25% |
| Early settlement charge | Usually applies during the initial period | 6 structures published, of which 2 carry none |
| Deposit | Your initial share of the property | Highest published finance-to-value across mainstream tiers is 95%, from 2 records |
Every figure in the right-hand column comes from the same records behind our provider comparison and rates page, checked . Criteria can change without notice.
See the full Islamic versus conventional mortgage comparison for the side-by-side, and how Islamic mortgages work for the process from application to full ownership.
The follow-on rate is the number most readers underestimate. It is not the headline. On the products we hold, published follow-on rates run well above the initial rates advertised alongside them, which is why the length of the initial period matters as much as its price.
What a home purchase plan costs
Across the 42 priced product records we hold from the three mainstream providers, published initial rates run from 5.50% to 7.14%. Those two figures are not alternatives to one another: they sit at different deposit tiers, for different customer types, on different rate types. The lowest published figure in a range is almost never the one a given buyer can have. Minimum finance amounts start at £50,000, In the UK-resident two-year fixed benchmark we use on the comparison page, moving deposit tier changes the payment by more than the difference between providers at the same tier.
Islamic home finance is not automatically cheaper than a conventional mortgage. Rates, fees, deposit tier and follow-on pricing all move the total, so compare the same borrower scenario rather than the headline number. We will publish the measured difference on our cost comparison rather than assert one here.
Price it on your own figures See current published rates Ask an adviser your question
What protections you have
Entering into and administering a home purchase plan are regulated activities, and the FCA's Mortgages and Home Finance: Conduct of Business sourcebook applies to firms carrying on home finance activities. MCOB carries tailored provisions for home purchase plans through the disclosure, advice, charges, arrears and post-sale chapters, so the pre-sale illustration, the suitability rules around advice and the treatment of payment difficulties all have rules attached to them.
Source: FCA Handbook, MCOB 1.2, read on .
Three consequences a buyer can act on:
- Before you apply. You should receive standardised information about the plan and what it costs, so you can compare it against another provider's document rather than against a marketing page.
- Your right to occupy. The rules require firms to protect your interests to a reasonable standard, which covers your right to live in the property and the interest you are acquiring in it. Ask what happens to your share if the provider transfers its interest or fails.
- If you fall behind. Specific arrears and repossession provisions apply, rather than the arrangement being purely a matter of contract between you and the provider.
Check the provider on the FCA Register before you apply, and check the permission rather than the name. An authorised firm does not mean every product it offers is a regulated home purchase plan. Our register records the reference number each provider states alongside what it says about the regulatory treatment of the specific proposition, because a firm can be authorised while a particular product sits outside the protections that authorisation implies.
What we could not verify
Three things, stated rather than smoothed over. First, the regulatory classification of individual products: providers state their own position and we publish that statement, having not obtained independent confirmation for each one. Second, whether the exceptions providers make through selected brokers differ from their published criteria, which we have not raised with them. Third, follow-on rates for two providers, which we could not verify from a published source on 7 August 2026.
Everything on this page that carries a figure links to the record it came from. Our methodology sets out the sources we use and their order of trust, and the change log records what moved and when.
Common questions
- What is a home purchase plan?
- A home purchase plan is a regulated home finance arrangement in which the provider buys the property, or a share of it, and you buy that interest from the provider over an agreed period while living in at least 40% of it. The legal test is set out in article 63F of the Regulated Activities Order.
- Is a home purchase plan the same as an Islamic mortgage?
- Not exactly. "Islamic mortgage" is a marketing phrase covering several arrangements. A home purchase plan is a specific regulated category. Diminishing musharaka, acquisition and rent, and ijara arrangements are generally home purchase plans. Some murabaha structures instead fall within the regulated mortgage regime.
- Are home purchase plans regulated by the FCA?
- Entering into and administering a home purchase plan are regulated activities, and MCOB applies to firms carrying on home finance activities, with tailored provisions for home purchase plans in the disclosure, advice and arrears chapters.
- Do you pay rent or interest on a home purchase plan?
- Rent. The payment is rent on the share of the property you do not yet own, alongside acquisition payments that buy out the provider’s share. Providers publish a rate that plays a similar pricing role to an interest rate, but the underlying contract is a different one.
Key takeaways
- A home purchase plan is a legal category, not a brand. Four conditions in article 63F decide whether an arrangement is one, including that you occupy at least 40% of the property.
- You pay rent, not interest. The rate plays a similar pricing role. The contract underneath is different, and so is who holds the ownership interest.
- Not every Islamic mortgage is a home purchase plan. Murabaha structures may sit in the regulated mortgage regime instead, and 4 of the 7 active propositions we track are murabaha-structured.
- The follow-on rate and the deposit tier move the cost more than the provider does. Compare at your own deposit tier, not on the lowest published figure.
- Check the permission, not the name. A firm can be authorised while a specific product sits outside the protections that implies.
Next: compare the providers offering home purchase plans, or check your situation against their published criteria.