Al Rayan Bank: how do its savings accounts and mortgages compare?

With several fixed-rate savings accounts making it into the best buy tables, it’s time you found out about Sharia law-based Al Rayan Bank. Who is Al

With several fixed-rate savings accounts making it into the best buy tables, it’s time you found out about Sharia law-based Al Rayan Bank.

Who is Al Rayan Bank?

Most people probably haven’t heard of Al Rayan Bank, but with 70,000 UK customers and a rapidly expanding business that could soon change.

Al Rayan Bank has just been named the UK’s best fixed savings account provider by personal finance data firm Moneyfacts.

It is a subsidiary of Qatar-based Islamic bank Masraf Al Rayan that has operated in the UK since 2004. The bank specialises in Islamic finance, but estimates that 94% of its fixed-term deposit savings customers are not Muslim.

Al Rayan is the UK’s largest Sharia-compliant bank. This means it cannot do business with, or invest in, businesses that are considered unlawful under Sharia rules. This includes companies that are involved in gambling, tobacco, pornography, arms and alcohol.

These restrictions mean Al Rayan can appeal to ethical investors.

The bank offers current accounts, mortgages, buy-to-let mortgages and savings accounts.

What is Islamic finance?

As the bank operates Islamic finance, its mortgages – known as Home Purchase Plans – work a little differently.

You pay the bank rent rather than interest while you repay your loan as Sharia law doesn’t allow a Muslim to lend money and make a profit from that loan. You cannot make money from money.

This also means the savings accounts are a little different.

You don’t technically earn interest on your savings – again you cannot make money from money. Instead, the bank embarks on Sharia-compliant trading to generate a profit that is then paid to you.

That means that savings accounts have ‘expected profits’ rather than interest rates.

How do its savings rates compare?

Al Rayan Bank is often around the top of the best buy tables when it comes to fixed-rate savings accounts.

At present, it is offering an ‘expected rate’ of 1.91% on its 12-month bond; the next best account pays 1.80% interest.

Account

Interest rate (AER)

Minimum deposit

Access

Bank of London and the Middle East Premier Deposit Account

2.00%

£25,000

Post

Al Rayan Bank Fixed Term Deposit

1.91%

£1,000

Online, post, phone, in-branch

Atom Bank 1 Year Fixed Saver

1.80%

£50

Online, mobile app

Kent Reliance 1 Year Fixed Rate Bond Issue 47

1.70%

£1,000

Online, post, in-branch

Paragon Bank One Year Fixed Rate

1.60%

£1,000

Online

It is also top for two-year accounts with an ‘expected rate’ of 2.02%. Over three years it is second-best with a rate of 2.07% compared to 2.2% from NS&I.

Account

Interest rate (AER)

Minimum deposit

Access

Bank of London and The Middle East Premier Deposit Account

2.10%

£25,000

Post

Al Rayan Fixed Term Deposit

2.02%

£1,000

Online, post, phone, in-branch

Atom Bank 2 Year Fixed Saver

2.00%

£50

Online, mobile app

Secure Trust Bank Fixed Rate Bond 2 Year Term (Series 17)

1.85%

£1,000

Online (to open the account, post and phone (to operate the account)

Masthaven Bank Ltd 2 Year Fixed Term Bond

1.80%

£500

Online, phone (to operate the account)

Are your savings safe?

Savings held with Al Rayan Bank are covered by the Financial Services Compensation Scheme (FSCS).

This means that if the bank were to go bust the FSCS would reimburse up to £85,000 per account or £170,000 for joint accounts.

Want to keep looking? Compare more savings accounts with loveMONEY right now

How do its mortgages compare?

While its savings products are strong, Al Rayan’s Home Purchase Plans are far more expensive than the best-buy mortgages.

It currently offers deals with ‘interest rates’ ranging between 2.44% and 2.94%; by contrast, there are a handful of mortgage lenders out there who will let you borrow at less than 2%, provided you own a sizeable chunk of your home already.

Find cheaper deals at the loveMONEY mortgage comparison centre

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