LONDON - Lloyds TSB, Britain's fifth-largest bank, became on Monday the country's first high street bank to offer mortgage services compatible with Islamic Sharia law.
Lloyds TSB said it would cater to the needs of Britain's approximately 1.8 million Muslims, following in the footsteps of the Islamic Bank of Britain (IBB), which opened in London last September offering the same service.
Under the new Lloyds TSB mortgage, the bank would fund the majority of a house purchase.
The customer would then repay that sum over a fixed period, alongside a rent payment for use of the property.
Crucially, no interest would be payable, because under Islamic law both payment and receipt of interest are forbidden.
The mortgage offered a solution to Muslim customers who wanted to buy a property but would not enter into a traditional mortgage agreement, the bank said.
"Finding the money for a new home can be tough at the best of times, but Britain's Muslims face an even more difficult dilemma," said Mark Austin, of Lloyds TSB Islamic Financial Services.
"With traditional, interest-based mortgages out of the question for many, the choice has tended to be between going against the faith or avoiding a mortgage altogether."
The move follows Lloyds TSB's recently-launched Islamic bank account, which also offers no interest or overdraft facilities to comply with Sharia law.
The mortgage and current account were being piloted in branches across heavily-Muslim populated areas of Britain, including Edgware Road in central London, Luton, north of the capital and the country's second city Birmingham.
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