THE Council of Mortgage lenders has called on the government to make it easier and cheaper for lenders to offer mortgages to Muslims.

The group claims that with 3 million Muslims living in the UK there was a significant demand for Shariah-compliant loans but changes in legislation were needed to enable lenders to offer them an equal footing with conventional mortgages.

Islam forbids the payment or receipt of interest so under an Islamic mortgage the financier buys the property and then sells it on to the buyer for a higher price.

Instead of charging interest they either sell it for a higher price or sell it for the same price but also charge rent on the property.

But one of the main problems with the systems is that two lots of stamp duty have to be paid as ownership of the property changes twice and this makes the mortgages more expensive.

The loans are also considered to be more risky than traditional mortgages, meaning lenders have to hold more capital to off-set this, which again adds to the cost.

They also cannot claim state aid towards mortgage payments if they are unable to work because this is based on interest payments.

An independent working party has been set up under the auspices of the Bank of England to look into these issues and find a way to offer the mortgages.

Andrew Buxton, Chairman of the working group said, "We know that there is pent up demand in the UK for mortgage finance structured in accordance with Islamic principles.

"But the hurdles make it more complex and expensive than it needs to be."

Halal Mortgages consultant for 1st Ethical, Moulana Fazlurrehman said such moves were long overdue, "There is so much demand for Shariah-compliant mortgages and we are always getting enquires from the public who have in the past seen interest based mortgages as no-go areas".

Blackburn based Moulana added, "1st Ethical is an Independent Financial Advisor to Muslims, we offer our mortgages through an Islamic bank and conduct all the financial assessments of the client. The bank is very strict concerning this and clients must pay a 20% deposit in most cases.

"This isn't the case for normal high street mortgages where the client can get up to a 100% mortgage if they wish".