Do customers care how ethical their financial products are?

Banking executive points to heightened awareness

Do customers care how ethical their financial products are?

Mortgage customers are taking a greater interest in where their money is invested, according to a banking executive, who identifies a heightened awareness of the ethical aspect of financial products.

But, housing supply is limited, with new property completions lagging behind demand, warns Alan Fitzpatrick, who is head of property finance at mortgage provider Nomo.

It describes itself as the world’s first digital, Sharia compliant, cross-border bank. It was built for Middle East customers seeking to bank globally and, particularly, to invest in UK property.

“Customers are increasingly looking at the ethical credentials of their financial products, and are taking more of an interest in where their money is being invested,” Fitzpatrick told Mortgage Introducer. “The Sharia principles Nomo is governed by mean that we will never place a customer’s money in interest-bearing investments or tobacco, alcohol and gambling industries. We do not charge interest, and we are completely transparent with our customers.

“The principles of fairness, honesty, integrity and transparency are at the heart of everything we do and shape how we treat our clients, employees and stakeholders. This is something which we feel customers will appreciate, even if they do not need to use a Sharia-compliant financial product.”

Do foreign investors want to buy property in the UK?

Nomo’s customers are typically based in areas of the GCC - The Gulf Cooperation Council. It is an organisation which comprises six members - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates - to further integration between them. They often want to purchase a holiday home or invest in rental property in the UK.

“There are very few options for customers who want to do this,” Fitzpatrick observed. “The majority are looking for Sharia-compliance, but first and foremost it’s about being able to help them access the UK property market.

“As we soon hope to expand Nomo to UK customers, we anticipate the Sharia-compliance aspect of what we do will be really important, as many Muslim customers in the UK currently find it difficult to find Sharia finance to purchase property.”

Current providers often focus on high and super high net worth individuals, according to Fitzpatrick, whereas Nomo is typically more focused on affluent customers.

“The UK Government has been taking measures to level the playing field for Islamic banks in recent years,” he said, “including the introduction of the Alternative Liquidity Fund, which allows Islamic banks to deposit money into the Bank of England in the same way that more traditional banks are able to do. I think the key thing is raising awareness that Islamic finance options are available.

“Typically, our clients are purchasing holiday homes for themselves or flats for their children to live in while they are studying at university. Areas like Milton Keynes are very popular with our clients, as well as areas that are close to leading UK universities. We’re also seeing significant investor interest in cities like Birmingham & Manchester, where the yields are better than London & the South East.”

Read next: Almost half of Muslims have never used Sharia-compliant products

How stable will the UK economy be in 2024?

Fitzpatrick is hoping for a less tumultuous year, after a frenetic period for the mortgage industry.

“Every time we think we are on a path to a more stable environment, something big seems to happen; pandemic, war, mini-budgets - the list is endless,” he reflected. “All the signs are that the base rate and inflation will reduce in 2024 but there may be more challenges round the corner.

“My hope is that the homebuying market in the UK in the next 12 months will continue to be an attractive place for our customers and that we will have developed our proposition to cater for more of their needs.

“The election is unlikely to play a significant role in shaping investor / buyer appetite among GCC customers, as the ties between the UK and the Gulf are longstanding. We may see a bit of a wait and see attitude as we get closer to an election but I don’t think it will have too much of an impact.”

He noted: “The UK property market is resilient and robust, with many working hard to make the process of buying a property in the UK more streamlined, digital, and much easier and quicker.

“There is a limit in terms of housing supply, with new property completions behind demand, and many struggling to save a big enough deposit to buy or be able to afford a property where they would like to live. The challenge and opportunity in front of us is to bring real product innovation and alternative choices for customers to better suit their needs.”

The importance of mortgage brokers

Nomo’s relationship with brokers is a key priority. It is making it easier for advisers to access its products, through new partnerships with broker platforms.

“We work very closely and collaboratively with brokers as they are an essential part of what we do,” Fitzpatrick shared. “We are keen to build even more relationships in 2024, and have more plans in the pipeline to improve the broker digital journey, to make it even easier for them to submit and track their cases.”

Fitzpatrick values one particular business lesson from his own career.

“Always surround yourself with intelligent and motivated people, who have the same customer-centric passions for creating better outcomes, and who positively challenge everyone around them to be better tomorrow than they were today,” he advises. “Also, it seems obvious, but don’t assume that just because you love what you have created that others will just come to you. You’ve got to show them, make the effort to go to see them and be fully open to act on feedback from customers and partners.”