FSA publishes first home reversion CP

The paper also examined whether Islamic Ijara home finance arrangements, one of the main Shari’a-compliant mortgages available to Muslims, should fall within the scope of a home reversion plan.

Under Ijara arrangements, the customer purchases the property from the financier, then leases it and pays additional rent for its use. Whilst the consultation said these deals were not conventional equity release products, it decided regulation would ensure a level playing field with other Islamic mortgages that already fall within FSA regulation.

Alan Stevenson, head of residential mortgages at Ahli Bank, a provider of Islamic Mortgages, said: “It’s only matter of time before Ijara deals will become regulated anyway so it is not surprising it could come under the scope of home reversion regulation.”

The CP also consulted on age limits for the definition of the scheme, despite traditional home reversion products targeting the elderly.

It said: “Home reversions can vary from those involving the sale of the entire house to those where only a small percentage is sold. We consider that it would be inappropriate to set an age threshold. There is a risk that providers could offer reversions just below this threshold.”

Dean Mirfin,, business development director at Key Retirement Solutions, said: “The Treasury wants to get an accurate definition of home reversions.

But providers and brokers dealing in Islamic mortgages or inheritance tax may be concerned that these financial products or arrangements could be included in this regulation.”