My client has applied for help with housing costs but it has turned out that the property is subject to Islamic finance so there is no interest. Does anyone know if there is any payment included in such a loan that could arguably be held to be analagous to interest? The DWP are saying that it is a co-partnership arrangement between the bank and the customer, provided specifically to avoid payment of interest. Consequently it is not a loan or mortgage so housing costs cannot be paid. I would be interested to know if there is any room for argument.

Interesting question. I googled some stuff but couldn't find very much of relevance.

Chapter four of this document from the council of mortgage lenders give a summary of Islamic mortgages:

www.cml.org.uk/cml/filegrab/pdf_pub_resreps_53full.pdf.pdf?ref=3872

I also found a document from 2005 that referred to a significant increase in the availability of Islamic mortgages and suggested 1) housing benefit rules were changed to prevent claims for Islamic Mortgages, and 2) some provision might be made to provide for help for people with Islamic mortgages.

I couldn't find any CD's or more relevant up-to-date information, but I do have a vague memory that a commissioner has considered an appeal for an Islamic mortgage.

As far as I am aware there is no room for argument. That said, I can see some areas where further research might turn something up... 1) with an Islamic mortgage, the bank buys the property and then sells it to the client at an inflated price (in lieu of interest), which the client pays back over time in the form of 'rent'. Could this not constitue a 'loan'? Since ISMI is no longer calculated based on actual interest but on a standard rate, I don't see why this shouldn't be applied to the the 'loan'? Is there any mileage in arguing that the ISMI rules discriminate unfairly on religous grounds - maybe to the point of breaching the HRA by interfering with the rights in article 14 in conjunction with article 8 or article 1 of the first protocol ECHR?

Thanks Tony, that's helpful. I think these financial arrangements have been developed quite recently and existing social security law won't allow for any help. I might look at the discrimination arguments, though, and encourage my client to bring the matter to the attention of her local MP.
Thanks again

There's an old CD CIS 14483/1996 which deals with a Muslim quasi mortgage scheme: the house was bought in the joint names of the occupier and the bank as tenants in common in the proportions of the amounts each had contributed. The equity belonging to the bank was divided into a large number of shares and the occupier bought the shares at agreed periods - when he had bought them all the property would be his alone.

In this case the Commissioner held that there had been no loan, which is the starting point for the ISM rules to apply, so no housing costs could be paid.