Ottawa's plan to expand access to halal mortgages could lower high borrowing costs, providers say
CBC
Federal budget references to mortgage products aimed at Canadian Muslims have members of the community celebrating, along with the mortgage providers that look to serve them, despite a lack of detail from the government on what is to come.
In Tuesday's budget documents, the federal government indicated that it's "exploring new measures to expand access" to financing methods such as "halal mortgages."
The budget provided few details about the plan, other than to say the government had been consulting "financial services providers and diverse communities" and that an update would come in the 2024 fall economic statement. Despite no specifics, it was a welcome addition to the budget for the Muslim community.
"It was very happy news for me," said Abdullah Mohiuddin, who has already taken out an Islamic, or halal, mortgage to purchase a home in the Edmonton area. He said he welcomed the government's announcement that it would be finding a way to increase access to a financial product he believes his community needs.
Several firms in various Canadian provinces offer halal mortgages. Halal is an Arabic word that translates in English to "permitted" or "allowed" under Islamic law.
These mortgages are deliberately structured to adhere to both Canadian law and the belief systems of many Muslims. Interest, which is referred to in many Islamic texts as "riba," is forbidden.
Although interest isn't charged, there are still costs associated with halal mortgages. In many cases, the costs are higher than those associated with conventional mortgages, and the mortgages are often not available at the branches of mainstream financial institutions.
"It seems like it's a little bit expensive," Mohiuddin said, adding he believes the lack of established legal definitions for a halal mortgage in Canada is behind the higher costs.
Muslims looking for a halal mortgage are still going to be paying carrying costs for a loan to purchase their home.
Providers in the industry said these costs can be higher because while there is demand, there are fewer providers — and some halal mortgage providers are unable to foreclose due to religious restrictions, which can increase what some financiers assess as risk.
That could be changing with the federal announcement, say executives with Islamic mortgage provider Eqraz Inc., based in Oakville, Ont. The company has said there's already a positive impact just from the five sentences in the federal budget regarding halal mortgages.
"I'm already seeing traction in our favour," said Zuhair Naqvi, the firm's founder and CEO, adding he believes that a mention in high-profile federal policies leads to credibility.
"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.
Mortgage providers who have worked with Eqraz echo his sentiment. "With the federal government coming in, this really encourages myself and excites me. And my phone is ringing off the hook," said Naveed Malik, a mortgage agent with Dominion Lending Centres.
