Murabaha is a sale at a disclosed cost plus a disclosed profit. The seller tells the buyer what the goods cost and adds an agreed mark-up, and in finance the price is usually paid in instalments. It is used in Islamic finance because a sale at a profit is permitted where a loan at interest is not.

How does a murabaha mortgage work?

In the classical form the provider buys the property and resells it to you at a higher, agreed price that you pay in instalments. Three of the four murabaha providers in our UK register use a different form, commodity murabaha, and the fourth does not say which: the provider sells you metal on deferred terms, the metal is sold for cash, and you use the cash to buy the home yourself, with the provider taking a charge over it.

What is commodity murabaha?

Commodity murabaha, also called tawarruq, raises cash through a commodity trade. The provider buys a commodity, usually metal, sells it to you at a marked-up price payable later, and the commodity is sold on for cash straight away. You owe the marked-up price; you hold the cash.

Is a murabaha mortgage regulated in the UK?

Yes, as a mortgage. The FCA says murabaha arrangements are not home purchase plans: they are regulated mortgage contracts where the conditions are met, including a first legal charge over the property. The FCA’s mortgage conduct rules apply to them as to any other mortgage.

What is the difference between murabaha and ijara?

Murabaha is a sale: you owe a fixed price and, in the commodity form, own the home from the start. Ijara is a lease: the provider owns the home and you pay rent, with ownership passing to you over or at the end of the term. In the UK, ijara and diminishing musharaka plans are home purchase plans; murabaha is regulated as a mortgage.

Can you repay a murabaha early?

Yes, but what it costs depends on the contract, because the profit is part of a price fixed at the start. One UK provider publishes that settling in full during a fixed period leaves the profit for the rest of that period payable. Another publishes no early payment charge on its variable range.

Terms explained · Murabaha

What is murabaha?

Murabaha is a sale at a disclosed cost plus a disclosed profit, usually paid in instalments. In home finance the provider does not lend you money: it sells you something at an agreed mark-up and you pay the price over time. In the UK it is used in one form above all, commodity murabaha, where a trade in metal raises the cash and you buy the home yourself. The FCA regulates it as a mortgage, not as a home purchase plan, and that changes some of the rules you are protected by.

Our position, stated once

We report what the standards bodies have resolved, what the providers state and what the regulator's rules say. We do not rule on whether any murabaha product is permissible, and nothing on this page should be read as a ruling.

By the Islamic Mortgage Guide research team. Published 16 October 2026. Sources read 16 October 2026. Provider records from the register, checked on the dates each one states.

How murabaha works

A murabaha is a sale in which the seller discloses what the goods cost and adds an agreed profit. The buyer knows both numbers. In finance the price is deferred: the provider buys the asset first, then sells it to you at cost plus profit, and you pay that fixed price in instalments. Nothing is lent, so nothing accrues interest. You owe a price, not a loan.

The version banks use is called murabaha to the purchase orderer, because you ask the provider to buy the asset before it sells it to you. The International Islamic Fiqh Academy permits it on two conditions that do real work. The provider must own the asset and carry the risk of losing it before it sells it to you. And the promises made before the sale must not bind both sides: a one-sided promise can be binding, but a promise binding both parties without an option to withdraw is treated as a sale of something the seller does not yet own.

Source: International Islamic Fiqh Academy, Resolutions 40 and 41 (2/5 and 3/5), fifth session, Kuwait, December 1988, read 16 October 2026.

Property murabaha and commodity murabaha

There are two ways to use murabaha for a home. In property murabaha the provider buys the house and resells it to you at a mark-up. In commodity murabaha, also called tawarruq, the provider never buys the house: it sells you metal on deferred terms, the metal is sold for cash, and you buy the home with that cash. Three of the four murabaha providers in our register state the commodity form, and one states murabaha without saying which. None publishes a property murabaha.

Three ways an Islamic provider finances the same home

Property murabaha

The provider buys the house
It sells it to you at cost plus profit
You pay the fixed price in instalments

Commodity murabaha

The provider sells you metal on deferred terms
The metal is sold for cash
You buy the home and it takes a charge

Co-ownership plan

You and the provider buy together
You pay rent on its share
You buy its share over the term

Only the third leaves the provider owning part of your home. In commodity murabaha you are the owner from the first day and the provider holds a charge, as a mortgage lender would.

How one UK provider describes the commodity trade

Nomo by BLME publishes the steps in its own words. It buys metal from one broker at a price equal to the finance amount, sells that metal to you at a marked-up price on deferred payment, and you sell the metal straight away to a second broker for cash. The cash is the finance. It states that the bank does not take ownership of the property, that you own it from day one, that the bank takes a charge over it, and that you sign a power of attorney so it can carry out the trade on your behalf.

Property murabaha, commodity murabaha and a co-ownership home purchase plan compared
Question	Property murabaha	Commodity murabaha	Co-ownership home purchase plan
Who owns the home at the start	You, once the provider resells it	You, from completion	You and the provider, in shares
What the provider holds	A charge for the unpaid price	A charge for the unpaid price	Its ownership share, often with a legal charge too
What you pay each month	An instalment of a fixed price	An instalment of a fixed price	Rent on its share plus a payment buying more of it
UK regulatory category	Regulated mortgage contract, where the FCA's conditions are met	Regulated mortgage contract, as each provider states	Home purchase plan
Offered by a provider we track	None	Al Rayan Bank Premier Home Finance, Kuwait Finance House PLC, Nomo by BLME	The three mainstream providers

Sources: Nomo, Understanding Shariah-compliant mortgages; FCA Handbook, PERG 14.4 Q25. Read 16 October 2026. Structures as each provider states them in the register.

Who offers murabaha home finance in the UK

Four propositions in our register finance a home through murabaha, and none of them is one of the three mainstream providers open to an ordinary UK-resident application. Each one narrows the door: a high minimum, a Gulf residency requirement, or a private-banking relationship. A UK buyer with a standard deposit and a standard finance amount will meet a home purchase plan, not murabaha.

UK murabaha home finance propositions, with who each is for and what each publishes
Provider	Form, as stated	Who it is for	Finance and deposit	Lowest published murabaha rate	Checked
Al Rayan Bank Premier Home Finance	Commodity Murabaha (Tawarruq)	Qatar, Saudi Arabia, Kuwait, Bahrain and Oman applicants	Minimum not published; finance-to-value negotiable	Priced per client	9 October 2026
Kuwait Finance House PLC	Ijarah and Commodity Murabaha	UK and non-UK residents	From £250,000; finance-to-value up to 70%	5.50%	9 October 2026
Nomo by BLME	Commodity Murabaha	Residents of Bahrain, KSA, Kuwait, Qatar, UAE and Oman; not UK residents	From £100,000; finance-to-value up to 75% on every published range	5.69%	9 October 2026
QIB (UK) plc	Murabaha	Private-banking/HNW clients	Minimum not published; finance-to-value bespoke / not published	Not published	9 October 2026

Rates are the lowest initial rate among each provider's murabaha rows only; Kuwait Finance House PLC's ijarah range is left out of its figure. Its murabaha range is variable and tracks its own base rate, which follows the Bank of England's. Every row comes from the provider's own pages, as recorded and dated in the register.

Is a murabaha mortgage regulated?

Yes, as a mortgage. The FCA's perimeter guidance says murabaha arrangements are not home purchase plans, because the homeowner buys the property from the provider on deferred terms. Where the conditions are met, including a first legal charge over the home, they are regulated mortgage contracts. Ijara and diminishing musharaka plans are home purchase plans instead. The guidance describes a resale of the home; commodity murabaha reaches a similar position by a different road, with you owning the home and the provider holding a charge, and every one of the four murabaha providers in our register states that its owner-occupier product is FCA regulated.

The category is not a label. It decides which rules apply. One example matters to anyone who may move or refinance within a fixed period. For a regulated mortgage contract, MCOB 12.3.1R allows an early repayment charge only if it can be expressed as a cash value and is a reasonable pre-estimate of the costs of repaying early. The FCA's charges chapter applies to a home purchase provider only through MCOB 12.7, which is guidance that charges be transparent and not unfair or excessive. The arrears and repossession rules, by contrast, apply to both.

Sources: PERG 14.4 Q25; MCOB 12.3.1R; MCOB 12.1.2R; MCOB 12.7.1G. All read 16 October 2026. The early settlement charges on the home purchase plans are set out in how Islamic mortgages work.

What happens if you repay a murabaha early

In a murabaha the profit is part of a price agreed at the start, so repaying early raises a question a loan does not: is the unearned profit still owed? The providers we track answer it differently, and the answer is in the contract rather than the rate.

Nomo by BLME, fixed rates: Its product page states that a client who repays in full within the fixed period pays the outstanding finance and the bank's profit. Its own example, on a five-year fix: repaid in month 12, the client is liable for all profit for the remaining 48 months; in month 60, nothing more.
Kuwait Finance House PLC, variable range: Its page states no early payment charges on its variable-rate products and that you can settle the outstanding balance at any time, with a legal fee and an administration fee that may apply.
Al Rayan Bank Premier Home Finance: No early settlement fee, as the register records it. Pricing is agreed per client.
QIB (UK) plc: Bespoke: terms are set case by case for private-banking clients.

Our calculation

On £300,000 over 25 years at Nomo by BLME's published 6.19% five-year fixed rate, the profit falling in months 13 to 60 on a level-instalment schedule comes to about £70,175. That is the order of sum the published example describes for a client settling in month 12, on top of the roughly £294,810 of finance still outstanding.

An illustration on our own schedule, not the provider's figure. Its offer documents govern, and the product is for residents of the Gulf states, not UK residents.

For a regulated mortgage contract, MCOB 12.3.1R allows an early repayment charge only as a reasonable pre-estimate of the costs of repaying early. Whether a provider treats remaining profit as an early repayment charge under that rule, or as part of the price, is not something its page says, and we have not yet asked. Before you sign any murabaha, ask for the settlement figure in pounds at month 12, month 24 and the end of the fixed period.

Sources: Nomo, current products and rates; Kuwait Finance House, owner-occupied commodity murabaha. Read 16 October 2026.

Is murabaha halal? Where scholars differ

The sale itself is not the dispute. Murabaha to the purchase orderer is accepted by the International Islamic Fiqh Academy on the conditions above: the seller owns and carries the risk before it sells. The disagreements are about two things a UK reader meets, and both are about how the sale is used rather than whether a sale at profit is allowed.

The commodity form

In 2009 the Fiqh Academy distinguished classical tawarruq, where a buyer on credit sells the goods on to someone else for cash, which it permitted subject to the conditions of sale, from organised tawarruq, where the financier arranges the onward sale itself, directly or through an agent. It prohibited the organised form, on the ground of explicit, implicit or customary collusion that makes it a route to present cash for a larger future debt. The Accounting and Auditing Organization for Islamic Financial Institutions publishes a separate standard on tawarruq, No. 30, which is widely reported to permit it subject to controls rather than prohibit it; its full text is available to members only and we have not read it.

Nomo by BLME states that it carries out the trade on your behalf under a power of attorney, and describes its product as Shariah-compliant. We have not read the Sharia certificate of any of the four murabaha providers, so we cannot report what their scholars assessed. We report the resolution and what the providers state side by side; weighing them is a question for a scholar you trust.

Pricing against the market

A murabaha's profit is often set by reference to a market rate: Kuwait Finance House PLC states that its murabaha profit rate tracks its own base rate, which follows the Bank of England's. The same form-against-substance argument made about home purchase plans applies here, and our page on riba sets out both sides of it.

Sources: International Islamic Fiqh Academy, Resolution 179 (5/19), 19th session, Sharjah, April 2009; Resolutions 40 and 41 (2/5 and 3/5). Read 16 October 2026. Certificates for the mainstream products are on the certification page.

Stamp duty on a murabaha

A property murabaha involves two purchases, the provider's and then yours, which would look like two taxable transactions. HMRC's alternative property finance relief under section 73 of the Finance Act 2003 covers exactly this: the second transaction, from the institution to you, carries full relief, and the combined effect brings the stamp duty in line with a purchase on a conventional mortgage.

Commodity murabaha does not raise the question in the same way, because the provider never buys the home: you buy it yourself with the cash the trade released, so there is one purchase, yours. We have not found HMRC guidance written for commodity murabaha specifically. Ask your conveyancer to confirm the treatment in writing, and note that Wales and Scotland run their own land taxes.

Source: HMRC, SDLTM28400, general overview FA03/S73, read 16 October 2026. The co-ownership relief is covered on the remortgage guide.

What we could not verify

Which murabaha QIB (UK) plc uses. It states murabaha without saying whether the sale is of the property or of a commodity. Its pages do not publish terms.
How remaining profit is treated on early settlement. Whether Nomo by BLME treats it as an early repayment charge under MCOB 12.3.1R or as part of the price. Not yet raised with the provider.
The specialist providers' Sharia certificates. We hold certificates for the mainstream home purchase plans only. None of the four murabaha providers' certificates has been read to that standard yet.
AAOIFI's standards on murabaha and tawarruq. Standards 8 and 30 are available to members only. We report that they exist and have not summarised their contents.
Stamp duty on commodity murabaha. We found no HMRC guidance written for it, as set out above.

Compare the mainstream providers What a home purchase plan is All terms explained

Common questions about murabaha

What is murabaha?: Murabaha is a sale at a disclosed cost plus a disclosed profit. The seller tells the buyer what the goods cost and adds an agreed mark-up, and in finance the price is usually paid in instalments. It is used in Islamic finance because a sale at a profit is permitted where a loan at interest is not.
How does a murabaha mortgage work?: In the classical form the provider buys the property and resells it to you at a higher, agreed price that you pay in instalments. Three of the four murabaha providers in our UK register use a different form, commodity murabaha, and the fourth does not say which: the provider sells you metal on deferred terms, the metal is sold for cash, and you use the cash to buy the home yourself, with the provider taking a charge over it.
What is commodity murabaha?: Commodity murabaha, also called tawarruq, raises cash through a commodity trade. The provider buys a commodity, usually metal, sells it to you at a marked-up price payable later, and the commodity is sold on for cash straight away. You owe the marked-up price; you hold the cash.
Is a murabaha mortgage regulated in the UK?: Yes, as a mortgage. The FCA says murabaha arrangements are not home purchase plans: they are regulated mortgage contracts where the conditions are met, including a first legal charge over the property. The FCA’s mortgage conduct rules apply to them as to any other mortgage.
What is the difference between murabaha and ijara?: Murabaha is a sale: you owe a fixed price and, in the commodity form, own the home from the start. Ijara is a lease: the provider owns the home and you pay rent, with ownership passing to you over or at the end of the term. In the UK, ijara and diminishing musharaka plans are home purchase plans; murabaha is regulated as a mortgage.
Can you repay a murabaha early?: Yes, but what it costs depends on the contract, because the profit is part of a price fixed at the start. One UK provider publishes that settling in full during a fixed period leaves the profit for the rest of that period payable. Another publishes no early payment charge on its variable range.