Mortgage providers hopeful as feds look to expand access to product
The recent federal budget's mention of exploring measures to increase access to "halal mortgages" has Muslims and Islamic finance providers celebrating despite lacking details on the government's plan.
While the budget was light on details, the inclusion was enough to satisfy Abdullah Mohiuddin of Edmonton, a current halal mortgage holder.
"It was very happy news for me," Mohiuddin told CBC News.
Providers like Zuhair Naqvi, CEO of Ontario's Eqraz, are already seeing traction. He said that even just the government's mention has started to enhance the credibility of halal mortgages.
"It allows me to go to the banks and the lenders and powers that be and tell them, 'Look, guys, the government is supporting this, so please don't be worried or anxious about participating in this,’" Naqvi said, anticipating more firms will participate.
Halal, meaning "permitted" under Islamic law, refers to mortgage products structured without interest charges or “riba”, which are forbidden. The lack of interest does not mean these mortgages are cost-free. They often carry higher costs than conventional mortgages due to the limited number of providers and the inability of some to foreclose, raising financial risks.
Mortgage agent Naveed Malik estimates current halal mortgage costs run around 4% above conventional products. However, wider availability from more providers could spark competition to lower fees.
Read more: Halal mortgages: Executive on niche's growth potential in Canada
Furthermore, the absence of established legal definitions for these interest-free mortgages complicates matters, making it difficult for them to be insured and potentially leading to higher expenses.
Islamic finance experts point out that the structure of halal mortgages often differs from conventional ones, sometimes resembling rent-to-own arrangements or involving unique fee setups instead of typical interest payments. Legal challenges also persist, such as issues with land titles and the application of landlord and tenant legislation to certain contracts.
A 2010 government report found halal products shouldn't face "particular difficulties" under accounting rules, but legal ambiguities remain.
Still, many see the federal acknowledgment as a positive step toward clarifying rules to make halal options more accessible and affordable for Muslim homebuyers.
Make sure to get all the latest news to your inbox on Canada’s mortgage and housing markets by signing up for our free daily newsletter here.
