Shaken to the foundations

The Bank of England is expected to respond to rising house prices by raising short-term interest rates, which will have devastating consequences for borrowers. An alternative way to this is by increasing compulsory bank reserve ratios. The introduction of genuine Islamic financing would reduce inflation and the indebtedness of individuals in the economy. The current crop of Islamic home mortgages function in much the same way as mortgages in interest-based banking. These mortgages involve a mixture of the Islamic contracts of sale and rental, which has left the mortgages with a distinct lack of credibility.