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 exists in law, not in religion. The FCA's guidance says there is nothing in the definition limiting it to arrangements designed to comply with Islamic principles, while noting the definition is primarily directed at them. Entering into and administering a home purchase plan are regulated activities under the Regulated Activities Order 2001, article 63F, and the arrangement carries the protections described further down this page. Whether a given product is Sharia-compliant is a question for the provider's own scholars.
Source
FCA Handbook, PERG 14.4 Q24, read on .
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.
How a home purchase plan works, start to finish
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You put in a deposit
It becomes your opening share of the home, not a part of a loan.
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The provider buys the rest
It holds an ownership interest in the property. Nothing is lent to you.
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Each month, two payments in one
Rent on the share the provider still owns, plus an amount that buys a slice of it.
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You end up owning it outright
As your share grows the rent falls, until the provider owns nothing.
The legal test for a home purchase plan
Three conditions must be met when the arrangement is entered into, with a fourth that applies only in certain cases. They explain why providers ask about occupancy 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.
The 40% occupancy condition is a floor, not a target, which means a home can be partly let or partly used for business and still be a regulated home purchase plan. Let the whole property and you are outside the category, whatever the structure, and the consumer protections below do not apply in the same way.
Source
Regulated Activities Order 2001, article 63F, read on .
What is a regulated home purchase plan?
A regulated home purchase plan is one that meets the article 63F definition above: the provider buys the home or a share of it, you acquire that interest over time, and you or a family member will occupy at least 40% of it. Entering into, arranging, advising on and administering such a plan are activities that need FCA authorisation, and the mortgage conduct rules in MCOB apply to the firm. The word "regulated" is doing real work: the same Islamic structure used to buy a property you will let out is not a regulated home purchase plan, and a product where you own the home from day one and the provider takes a charge is regulated as a mortgage contract instead.
The table records what each provider states about its own owner-occupier product. We never infer the regime from a structure name, and where a provider states nothing the row says so.
| Provider | Structure | FCA-regulated for owner-occupiers, as the provider states |
|---|---|---|
| Abu Dhabi Islamic Bank | Sharia-compliant corporate finance | Not verified as UK retail HPP |
| Al Rayan Bank Premier Home Finance | Commodity Murabaha (Tawarruq) | Yes |
| Al Rayan Bank standard retail HPP | Legacy HPP | Yes |
| Gatehouse Bank | Acquisition & Rent HPP | Yes |
| Kuwait Finance House PLC | Ijarah and Commodity Murabaha | Yes for regulated owner-occupied cases |
| Nester | Investment/property finance | Not an owner-occupier HPP |
| Nomo by BLME | Commodity Murabaha | Yes |
| Offa | Diminishing Musharakah + Ijarah | Yes |
| Pfida OwnTogether | Equity shares + rental lease | No product-level FCA protection |
| QIB (UK) plc | Murabaha | Yes |
| StrideUp | Diminishing Musharakah + Ijarah | Yes |
| UBL UK / historical United National Bank | Unknown | Unknown |
| Wayhome Deposit Bridge | Five-year occupancy with purchase option; not a Home Purchase Plan | Not established as HPP |
Sources: FCA Handbook glossary, home purchase plan and Regulated Activities Order 2001, article 63F, read on . Provider positions from each provider's own published pages, as recorded in the register.
The structures UK providers actually use
5 structure families appear in the UK market we track, and a provider can use more than one. What changes 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 |
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 the table.
Not every Islamic home finance product is a home purchase plan
Islamic mortgage is a marketing phrase covering several 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, fall within the regulated mortgage regime instead. Of the 7 active retail propositions in our register, 4 use or include murabaha-based home finance, and the two regimes carry different documentation, disclosure and, at the margins, different consequences.
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. The reason the rate has a different name is the prohibition on riba, which is why the payment is rent on a share you do not yet own rather than interest on a loan.
| 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 1 is no charge at all (4 products) |
| Deposit | Your initial share of the property | Highest published finance-to-value across mainstream tiers is 95%, from 2 records |
The follow-on rate is the number most readers underestimate. On 52 of the 56 priced products we hold that publish one, it is above the initial rate advertised alongside it, and on the other 4 it is below, which is why the length of the initial period matters as much as its price. The Islamic versus conventional comparison has the full side-by-side, and how Islamic mortgages work the process from application to full ownership.
Where the right-hand column comes from
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.
What a home purchase plan costs
Across the 56 priced product records we hold from 2 of the 3 mainstream providers, published initial rates run from 5.53% to 7.55%. 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. The 5.53% figure is not open to everyone: EPC A or B required. Minimum finance amounts start at £50,000. Both the deposit tier and the provider move the price: the comparison page sets them side by side on one UK-resident two-year fixed benchmark.
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. The measured difference is on our cost comparison.
How your share of the home grows
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.
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 can offer a product that sits outside the protections that authorisation implies. Our register records the reference number each provider states alongside its own account of the regulatory treatment.
Source
FCA Handbook, MCOB 1.2, read on .
What we could not verify
The regulatory classification of individual products, which providers state and we have not independently confirmed. Whether exceptions made through selected brokers differ from the published criteria, which we have not raised with them. And the follow-on rate for StrideUp, not found in a published source on 9 October 2026. The methodology sets out the sources and their order of trust; the change log records what moved and when.
Common questions
- What is a regulated home purchase plan?
- A home purchase plan that meets the definition in article 63F of the Regulated Activities Order: the provider buys the home or a share of it, you buy that interest over time, and you or a family member will live in at least 40% of it. Entering into, arranging, advising on and administering one are FCA-regulated activities, and the mortgage conduct rules in MCOB apply. A buy-to-let arrangement on the same structure is not a regulated home purchase plan.
- 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.