Offset Mortgages are not Halal
I was wondering if offset mortgages are permissible. This is where the bank that gives you a mortgage will reduce your mortgage balance on which they charge interest by the amount in your bank account. For example, I have £100,000 in a Barclays account and I take out a £100,000 Barclays mortgage. They would not charge me any interest on this basis. Some lenders will allow you to offset family members’ funds too. For example, I take out a £300k mortgage with Natwest and my parents have £300k in a bank account with Natwest, I would not be charged any interest. I was wondering if the case with offset mortgages is similar to that of a 0% credit card where you do not pay interest on the amount you borrow unless you make a late payment.
بسم الله الرحمن الرحیم
An offset mortgage is not permissible. The transaction is interest based because the bank offsets the interest that would have been due, via the interest accrued on the savings. Moreover, if you already have the £100,000 in your bank account, you should use this instead. The risk is higher with a third party because if their funds decrease, the bank will charge you interest.
A credit card is different from an Offset mortgage because it is unrelated to your debit account. A person may not have any money in his debit account but can still make use of the credit card. Nevertheless, it should be noted that the use of a credit card is only permitted when there is a need to do so, on the condition that a person is certain he will not default and incur interest charges.
قال الله تعالى: وأحل الله البيع وحرم الربا، الآية، وقال الكاساني في البدائع (٧/٣٩٥): والتحرز عن حقيقة الربا وعن شبهة الربا واجب، انتهى. وفي الباب ما روى ابن ماجه (٢٢٧٦) عن عمر بن الخطاب قال: إن آخر ما نزلت آية الربا، وإن رسول الله صلى الله عليه وسلم قبض ولم يفسرها لنا، فدعوا الربا والريبة. وهو حديث صحيح، والريبة فسرها السرخسي في المبسوط (١٢/١٧٩) بشبهة الربا، انتهى۔
Allah knows best
21 Dhū al-Ḥijjah 1444 / 9 July 2023
Approved by: Mufti Shabbir Ahmed and Mufti Muhammad Tahir