Riba

[kadhim]

2 hours ago, Abu Hadi said:

Have you had a fixed rate mortgage ? I've had 2. What I described is not a fixed rate mortgage. 

Yes. Working on one now.

2 hours ago, Abu Hadi said:

With a fixed rate mortgage, you pay ONLY  interest for the first 10 years or so (I'm not sure you know what an amortization schedule is. You can look it up). For the first 10 years or so, you are basically renting the house. You're principle doesn't decrease (maybe by a few dollars).

I’m not sure where you got that impression, but that’s not how it works at all. Obviously, as with any loan, the payments at the front end (when the interest acts on a much higher remaining principal) are going to be more interest-heavy than the later ones, when the principal is much smaller. But on any normal loan you’re definitely paying down significant amounts of principal from the start. I’m in my first year right now and actually make a game of watching the principal go down each month. Right now roughly half the monthly payment, maybe a little more, is going to principal. 
 

2 hours ago, Abu Hadi said:

You are still responsible for 100% of the loan amount (approx 100%) should you decide to leave the house or you can't make the payments. If you are a few days late with the payment, the bank can come in, take your house, give you nothing, and you are stuck with a huge bill (penalties).

You’re always responsible for whatever is left on the loan. It’s a contract you sign. Of course if you are not able to continue to make payments you are not going to be able to keep the house. The house is the asset that is the collateral of the loan.

That is going to be the same any type of loan. The Islamic bank is not just going to let you stay there for free are they? At some point, they, as the majority owners of the property, will evict you. I would imagine they would have to buy you out in proportion to your ownership, and you would walk with that, less any fees that might apply. 

Much the same in many of the cases with a regular mortgage. The idea that a person necessarily walks away with nothing is the worst case scenario of foreclosure. And no, banks do not generally want to rush into foreclosure without exhausting all the other means available. Delayed payments, stretching out the amortization. And finally encouraging you to voluntarily sell at market if it’s just not working, in which case, you will walk away with your accumulated equity and the loan is wrapped up. 

But in reality a person is going to have 6 months, even a year to work through it if they cooperate with the bank in finding a solution. 

Banks do not want to foreclose. They will do a lot to avoid that. Foreclosure is ugly and expensive for the bank with legal fees, procedure, and so on. This link puts average US foreclosure costs for the bank at $50 000. That’s a whole person’s lower-middle sort of income in the US. That’s not chump change. 

2 hours ago, Abu Hadi said:

So you take all the risk, and they get all the reward.

As I pointed out above, foreclosure is a massive cost to the bank, and is a significant risk for them. A bank ends up in the red on a foreclosure. That risk of foreclosure costs is another part of what interest represents, beyond time value of money compensation and costs of managing the loan. It includes an insurance premium on the risk of your default. 

Meanwhile, in this worst case you walk away. You will not have a house. You will not have money from the exchange in your pocket. You lose everything you paid in over time. But that’s the same as if you had been paying rent all those years. Your credit rating will be toast for the better part of a decade. But they just means your ability to get new credit. 

You end up more or less neutral. The bank ends up behind by $50k. How is that a greater risk for you?

Or you sell it before it gets to foreclosure. You pay off the rest of the loan, the bank is whole, at least on the original principal. They lose out some expected profits from the remaining years though. You meanwhile walk off with at least some of your equity. You end up ahead, and the bank ends up a little behind. Again, how is that a greater risk for you?

[notme]

6 hours ago, kadhim said:

But in reality a person is going to have 6 months, even a year to work through it if they cooperate with the bank in finding a solution. 

In Canada it's like that?

When my mortgage was foreclosed, I had 3 months to come up with the full payoff amount, and then when I could not, eviction proceedings were started. The bank was very happy to take ownership of my house.

[kadhim]

2 hours ago, notme said:

In Canada it's like that?

When my mortgage was foreclosed, I had 3 months to come up with the full payoff amount, and then when I could not, eviction proceedings were started. The bank was very happy to take ownership of my house.

Salams. Sorry to hear you had to go through that. That sounds awful. 

Yes, I’m sure it depends from jurisdiction to jurisdiction and the specifics of the scenario. The figures I quoted there was also based on the clock starting with the first missed payment rather than when the foreclosure/power of sale process was formally started. 

[Ashvazdanghe]

16 hours ago, kadhim said:

That is going to be the same any type of loan. The Islamic bank is not just going to let you stay there for free are they? At some point, they, as the majority owners of the property, will evict you. I would imagine they would have to buy you out in proportion to your ownership, and you would walk with that, less any fees that might apply. 

Salam at least Islamic bank doesn't make you homeless which although Iranian banks are not totally Islamic anyway nobody has became homeless due to his debts of mortage which aaccording to  policy of  of Iranian banks even if owner of property can't pay debt after auction of his protery, there is still owner can rent it his house from Bank or new owner which is more fair than total confestication of property & making people homeless by American banks .

Quote

What are the stages of property confiscation by the bank?

If the owner of the property does not pay his installments or if he transfers his property to someone else without doing JAW's Mortgage(Amortisation) , the bank will take action to confiscate the property after giving a written warning to the owner . the regulations for the implementation of the prperty based  on law of  registration the regulation of applying contents of official documents , the file of the property will be reffered to the legal unit, after announcing the opinion of the legal unit to the bank secretariat,  auction of the property, which is the determination of the base price by the expert and saling of the property to the highest bid, will be  implemented. For auction The bank should proceed with the auction within 2 months after the announcement of the expert's opinion and publish the copy of the auction for public invitation 20 days before the auction.
 

 

Quote

Note: If the auctioned property is worth more than the demand, the rest of the amount will be returned to the owner of the property, but if its value is less than the demand, the owner must pay the rest of the amount as well.
Note: The bank may becomes the owner of the auctioned property through the auction and registers the document in its own name.

How to prevent the confiscation of the property by the bank?

Quote

1. Placing a new collateral in place of the previous collateral

According to the law, the bank is obliged to provide the conditions for exchange of collateral with specific instructions. In this case, the bank replaces the previous collateral with the new collateral. It is true that the person is obliged to pay his installments, but by doing this, it is possible for him to sell the previous property.

2. Real estate jaw's mortgage

It is not possible to sell the mortgaged property unless it is jaw's mortgaged. It means that the document is removed from the bank's mortgage. There are three possible ways to pay a mortgage:

     Debt settlement by the property owner
     The lender (bank) waiving his demand
     Disruption of the mortgage contract

 

Quote

final word
If a person's property is used as collateral in a bank mortgage, the bank has the right to confiscate the property if the mortgagor does not fulfill his obligations to pay the installments or transfer the property to another person without JAW's mortgage.
In fact, confiscation means confiscating the property.

 In order for the bank to be able to receive it's right after confiscation, it must proceed through an auction, which is the same as selling the property through a public invitation. If the owner wants to transfer his property to someone else, and at the same time to prevent confiscation of his property, he must either JAW's mortgage it or replace it with a new collateral. In fact, he should either pay his debt or puts  a new property as collateral .

https://www.daadapp.ir/article/58/مصادره-ملک-توسط-بانک

https://www.daadapp.ir/article/74/seizure-of-property-by-the-bank

[Abu Hadi]

On 1/29/2023 at 6:40 PM, kadhim said:

Salams. Sorry to hear you had to go through that. That sounds awful. 

Yes, I’m sure it depends from jurisdiction to jurisdiction and the specifics of the scenario. The figures I quoted there was also based on the clock starting with the first missed payment rather than when the foreclosure/power of sale process was formally started. 

Nope. That's the norm, at least here in the US. You have 90 days to come up with ALL the money you owe (payments plus penalties and interest added on top of the original amount, which is usually thousands and thousands of dollars). If you can't come up with it, you are evicted, then the bank resells your house. They take ALL the money for that sale and you get none of it, except in very rare and exceptional circumstances, and usually after many years and class action lawsuits (like what recently happened with Wells Fargo were they were found to be doing fraud with foreclosures. Let me ask you this, if they were not making money on these foreclosures, why would they bother to do fraud and risk getting in trouble, which is what happened ? So you're telling me that they would risk their reputation and break the law just to lose money ? Doesn't make sense. 

Yes, this is all in the contract, I am not disagreeing about that. This is in every contract. What choice do you have ? In the US, if you want a mortgage, you have maybe 3 or 4 choices. If you look at all of those contracts, they are basically the same. That is where the Islamic banking system could help. Giving people a choice. The only reason it isn't happening is because of the gigantic amount of influence those 3 or 4 big banks have over the US political system. There is no other reason that I can see. 

[EiE]

Continue to veer off topic as long as you like since that's what happens when your conscience disagrees with the fatwas, right?

[kadhim]

On 2/1/2023 at 6:17 AM, Abu Hadi said:

Nope. That's the norm, at least here in the US. You have 90 days to come up with ALL the money you owe (payments plus penalties and interest added on top of the original amount, which is usually thousands and thousands of dollars). If you can't come up with it, you are evicted, then the bank resells your house. They take ALL the money for that sale and you get none of it, except in very rare and exceptional circumstances, and usually after many years and class action lawsuits (like what recently happened with Wells Fargo were they were found to be doing fraud with foreclosures. Let me ask you this, if they were not making money on these foreclosures, why would they bother to do fraud and risk getting in trouble, which is what happened ? So you're telling me that they would risk their reputation and break the law just to lose money ? Doesn't make sense. 

Yes, this is all in the contract, I am not disagreeing about that. This is in every contract. What choice do you have ? In the US, if you want a mortgage, you have maybe 3 or 4 choices. If you look at all of those contracts, they are basically the same. That is where the Islamic banking system could help. Giving people a choice. The only reason it isn't happening is because of the gigantic amount of influence those 3 or 4 big banks have over the US political system. There is no other reason that I can see. 

So, first of all, the US is obviously not the only country in the world. So even if I just take what you’re saying at face value as a universal and uniform across all 50 states in the US—which I kind of doubt, but whatever—that’s one country, the country with probably the worst consumer protection record in the developed world.
 

No one has provided any authoritative answer to my earlier question if the 90 day clock that is being quoted here starts with the first late payment or rather when the lender formally starts the paperwork to foreclose. I kind of doubt it’s the first, but if someone has an authoritative link I’ll look at it and accept it if that’s demonstrably the case. 

But even if the process did in fact go from normal payment history to eviction in a span of merely 3 months as a typical scenario in the US, that would simply be how the US has chosen to implement (or rather not implement) consumer protections for mortgage contracts. That’s not some inherent reality to the nature of an interest-based mortgage. You can have interest-based mortgages, AND rules to protect customers and force banks to offer some reasonable flexibility to borrowers to either get back on track or arrange a sale to exit with some dignity. It’s two separate issues that you’re trying to glue together.

As for the matter that foreclosure is generally a money losing proposition for a bank, I posted a reference to support the average 50k loss figure. If you want to challenge that, I think you need to post something substantial to support that if you want to challenge it. 

Re: the Wells-Fargo anecdote, it’s hard to really comment anything in response to a claim without a reference. But the fact that it involved illegal fraud makes it kind of silly as an argument even against the existing rules. To your question though, as to why someone might do fraud even if they are not profiting from it, well, they may have been trying to put their thumb on the scale to minimize their losses. 

[kadhim]

On 2/2/2023 at 10:40 AM, EiE said:

Continue to veer off topic as long as you like since that's what happens when your conscience disagrees with the fatwas, right?

Is this directed at anyone in particular? 

I mean, what do you do? You just regularly turn your conscience off?

[EiE]

On 2/3/2023 at 12:10 AM, kadhim said:

Is this directed at anyone in particular? 

I mean, what do you do? You just regularly turn your conscience off?

It was addressed to @Abu Hadibecause he appears to base many of his responses on his ardent devotion to the fatwas of ayatullahs, even if it violates his conscience and morality.

[Ashvazdanghe]

Salam

12 hours ago, EiE said:

his ardent devotion to the fatwas of ayatullahs, even if it violates his conscience and morality.

Most important matter  in giving Fatwas by revered Ayatullahs  is considering all aspects of Fatwa which  it's crystal clear they consider that their Fatwa will be  inline with both of conscience and morality which if someone doesn't agree with their Fatwa so then they can bring all required evidences & documents for supporting their Fatwa which until now brother @Abu Hadi has supported all logical & moral Fatwas which thre are many evidences which he has opposed anything which has been against conscience and morality but on the other hand history of your posts shows that you have opposed many Fatwas even it has followed conscience and morality. just based on your personal judgment due to your insufficient knowledge & teachings.

[Abu Hadi]

On 2/2/2023 at 4:51 PM, kadhim said:

So, first of all, the US is obviously not the only country in the world. So even if I just take what you’re saying at face value as a universal and uniform across all 50 states in the US—which I kind of doubt, but whatever—that’s one country, the country with probably the worst consumer protection record in the developed world.
 

No one has provided any authoritative answer to my earlier question if the 90 day clock that is being quoted here starts with the first late payment or rather when the lender formally starts the paperwork to foreclose. I kind of doubt it’s the first, but if someone has an authoritative link I’ll look at it and accept it if that’s demonstrably the case. 

But even if the process did in fact go from normal payment history to eviction in a span of merely 3 months as a typical scenario in the US, that would simply be how the US has chosen to implement (or rather not implement) consumer protections for mortgage contracts. That’s not some inherent reality to the nature of an interest-based mortgage. You can have interest-based mortgages, AND rules to protect customers and force banks to offer some reasonable flexibility to borrowers to either get back on track or arrange a sale to exit with some dignity. It’s two separate issues that you’re trying to glue together.

As for the matter that foreclosure is generally a money losing proposition for a bank, I posted a reference to support the average 50k loss figure. If you want to challenge that, I think you need to post something substantial to support that if you want to challenge it. 

Re: the Wells-Fargo anecdote, it’s hard to really comment anything in response to a claim without a reference. But the fact that it involved illegal fraud makes it kind of silly as an argument even against the existing rules. To your question though, as to why someone might do fraud even if they are not profiting from it, well, they may have been trying to put their thumb on the scale to minimize their losses. 

I thought this was common knowledge. I forgot you are outside the US. A few years ago, this was in the news every day. Anyway, here is a link

https://www.jdsupra.com/legalnews/robo-signing-still-making-headlines-as-w-71886/

https://www.latimes.com/business/la-fi-wells-fargo-settlement-20140524-story.html

The synopsis is they mishandled foreclosure documents in an illegal way (including forging signatures on thousands of documents) in order to speed up the foreclosure process. So I'll ask again, if they were losing money on foreclosures, why would they do this ? Why would they try to speed up the process ? You would think they would slow it down and try to keep the 'homeowner' (I put in quotes because it's the bank who actually owns the home, not the person until the last penny of the principle of the mortgage is paid) in their home. Even if we put aside the moral question for a second (of kicking a family out of their home, which apparently doesn't bother them in the least) there is still the financial question of why would they want to foreclose if they are losing money. 

As for the statistics, there are certain circumstances and certain areas where the banks actually do lose money on foreclosures. This is because the real estate markets in the US are hyper local markets, meaning the numbers are very dependent on where the house is actually located. An example, if you got a mortgage for say $100,000 on a house in Detroit in 2001 and then tried to sell it in 2008, you would probably lose money because in Detroit, the housing market crashed around that time in a big way. The bank would lose money in that case because there is no way they could resell the house for that amount at that time. 

At the same time, these crashes are the exception and not the rule. There were many places in the US that if you bought a house in that city in 2001 and sold in 2008 you would actually make money. In some places like L.A., D.C., Raleigh / Durham, Minneapolis, Boston, Austin, Boise, Ann Arbor, Canton, etc, you would actually make alot of money since these markets actually went up between those years by quite a bit. In most places you would make maybe 10 to 20k, including most cities in Michigan, with the exception of Detroit. Although Detroit is a big city in terms of area, the population is not that large when compared to other big cities in the US. More than 90% of the people in Michigan live outside of Detroit. 

So what these propaganda groups like Turning Point USA, etc, do is that they selectively look at statistics only from certain small areas like Detroit in those years or the South Side of Chicago (Chiraq) and then extrapolate those out to the entire country. Those groups are shills for the big financial companies and they are funded by them. What they don't tell you is banks like Wells Fargo are nationwide so while they might lose money on foreclosures in a few areas, they make money in most areas, thus the robo-signing scandal. If housing prices didn't almost always go up, there would be no real estate industry. The whole industry is based on that fact. 

As for the clock starting at the first late payment, it does. After the 90 days, the bank starts foreclosure proceedings (in court) in most cases. These proceedings do take time, so they family isn't evicted on Day 91, in most cases. The paperwork has to make it's way around. While the legal process is proceeding, the bank tacks on additional interest and penalties so that when the eviction does happen, the 'homeowner' will owe so much money that it is doubtful that they can actually pay it. If they couldn't pay the original payment, which was lower, how on earth are they going to pay the higher amount ? This is what the banks count on. Mortgage laws do differ slightly from state to state but this basic framework is common to all of them. 

This is unjust because it is done to poor and lower middle class people only. They are the ones who end up losing their homes. Upper middle class and wealthy people have assets that they can sell if they get into a problem with their mortgage. They will usually do this very early in the process so that penalties and interest don't add up. They have stocks, bonds, 401ks, investment properties, etc. They also have a social network of other upper middle class and wealthy people to help them. Poor people and lower middle class don't have any of these resources, which is why the situation happens in the first place. This is why the US is increasingly becoming a country of a few billionaires, a few wealthy who are not billionaires, and many poor and destitute people. The confusion happens because many poor people in the US try to pretend like their rich by buying a expensive handbag or outfit, maybe a nicer car than they can afford, etc. They might walk around in an upscale mall or shopping area, of course not buying anything. This is an illusion and if you look at these people's finances you will find that they have more debt than assets (negative net worth) and they are maybe one or two lost paychecks away from losing everything, including their home.

They do this because, ironically, although most of the people in the US are poor (i.e. have negative net worth), there is still a huge social stigma attached with being poor. This is especially true in the immigrant, and particularly muslim communities in the US. They will never admit their poor, because this will leave them open to severe criticism from relatives like 'How could you be poor in the richest country in the world ?'. It is this type of stinging criticism they are trying desperately to avoid because these statements could destroy someone's self respect. It is much easier to be poor in places like Mexico, Costa Rica, ME, India, China, etc (i.e. most of the world). Most of the people are poor, will never become rich, and this is the norm and expectation. If someone becomes rich in these places, they are celebrated and if they never become rich, they are considered a normal person. If one of their relatives goes to the US, they are expected (by everyone in their family / village/ etc) to become rich. If they don't become rich, they are criticized and scorned, to an extent. These people have never been to the US, so they assume the streets are paved with gold and people are handing out hundred dollar bills to anyone who passes by.  There are alot of funny memes about this (although it is a serous issue)

Those who have been here know that this is definitely not the case and although you make more money, your expenses are also much higher than most places so it is just as hard as in most places to actually have money left over. This perception and myth of the US amoung the Muslim community is at the heart of many of our problems, but that is another topic, sorry for the tangent. 

[kadhim]

6 hours ago, Abu Hadi said:

The synopsis is they mishandled foreclosure documents in an illegal way (including forging signatures on thousands of documents) in order to speed up the foreclosure process. So I'll ask again, if they were losing money on foreclosures, why would they do this ?

Just an FYI, it’s usually considered rude to ask a question that was already answered. See my last sentence above. Probably they were doing it to minimize losses. If the mortgage is not realistically going to get back on track, shortening and streamlining the time to sale would reduce the time they are sitting without money coming in. Profit is effectively gains minus losses, so minimizing losses overall improves profits, although the specific item is still a loss.

Anyway, a reminder that I didn’t just pull that average 50k loss per foreclosure out of the air. I linked a source. So again, if you want to challenge that, you should probably find some actual data to link to. 

[Ashvazdanghe]

14 hours ago, kadhim said:

If the mortgage is not realistically going to get back on track, shortening and streamlining the time to sale would reduce the time they are sitting without money coming in. Profit is effectively gains minus losses, so minimizing losses overall improves profits, although the specific item is still a loss.

Anyway, a reminder that I didn’t just pull that average 50k loss per foreclosure out of the air. I linked a source. So again, if you want to challenge that, you should probably find some actual data to link to. 

Salam whole this has been portrayed in "big Short" movie which all of looting process of money of people by mortgage bonds which after relasing movie all of it has been discused as proof of it in financial sites .

Quote

Based on Michael Lewis’s New York Times bestseller by the same title, the film tells the story of six contrarian traders who sniffed out the housing crash before virtually anyone else. Their foresight helped them make gobs of money while Wall Street institutions crumbled. Michael Burry, who is portrayed by Christian Bale in the movie, made $750 million in 2007 alone because of the bets he made.¹

1. Why is Wall Street Involved with Home Mortgages In the First Place?

Quote

Finally, these MBS (each containing several hundred home mortgages) are further pooled together to form a “trust” that investors can buy into. The trust can sometimes be specialized so that certain tiers include just the highest quality MBS (those with the safest mortgages issued to the least risky borrowers) and others the lowest (subprime mortgages issued to those with less than stellar credit scores). Investors can then choose which tier to invest their money. Pension funds are required, for example, to be in only Aaa rated bonds and choose only the top tiers. Those with a higher appetite for risk may pick a Bbb rated tranche hoping for higher returns.

 

2. Short selling, collateralized debt obligations, and credit default swaps: what are they?

Quote

Let’s begin with what it means when someone “shorts” something on Wall Street. Investors will short a security (a stock or a bond) when they think the price of that product will go down in the future. It works like this:

Step one: the short seller borrows the stock from someone else (the counterparty). At the onset, the short seller will agree to return the borrowed stock, in full, to the counterparty on a specified date in the future—it could be a couple of days, months, even years. Step two: now that the stock has been exchanged, the short seller immediately sells the borrowed stock in the open market.

 

Quote

Let’s begin with what it means when someone “shorts” something on Wall Street. Investors will short a security (a stock or a bond) when they think the price of that product will go down in the future. It works like this:

Step one: the short seller borrows the stock from someone else (the counterparty). At the onset, the short seller will agree to return the borrowed stock, in full, to the counterparty on a specified date in the future—it could be a couple of days, months, even years. Step two: now that the stock has been exchanged, the short seller immediately sells the borrowed stock in the open market.

The dominoes eventually fell: homeowners with adjustable-rate mortgages saw their rates skyrocket, they then defaulted on their loans, cash flows to CDOs dried up, CDO managers couldn’t pay their bondholders, and the owners of the insurance contracts (the credit default swaps) got their big payouts.

3. The MacGuffin: The mortgage prospectus.

Quote

An important theme in Lewis’s book is his argument that no one on Wall Street—ratings agencies, investment banks, hedge funds, etc.—was doing their homework and asking the question: what’s behind these securities? Lewis argues that Wall Street was irresponsibly cranking out these products. In the movie, a big moment occurs when Michael Burry (played by Christian Bale), reveals that these assets are a house of cards (actually Jenga blocks).

Denouement

https://www.thirdway.org/memo/your-cheat-sheet-for-the-big-short

https://finbold.com/guide/michael-burry-the-big-short/

https://go.finimize.com/wp/the-big-short-finimized-for-you/

https://bankquality.com/blog/financial-lessons-from-the-movie-the-big-short/

[Ashvazdanghe]

Michael Burry recession warnings 2022 – 2023

More recently, Dr. Michael Burry has started and continues to warn us about the looming recession of 2022-2023. Michael Burry, through his Twitter account named “Cassandra B.C.,” has actively tweeted (most of which are now deleted) about the reasons why and the warning signs. Burry’s Twitter name comes from when Warren Buffett called Dr. Burry “Cassandra,” a Trojan priestess from Greek mythology who delivered true prophecies but,  just like Burry and his warnings about the housing bubble, was never believed. 

Via his tweets, Dr. Burry has commented the US stocks are likely to keep falling further, and warning several investors will incur heavy losses. He has also compared the upcoming market slump to that of the dot-com crash, caused by a bubble in passive investing, which has, in turn, inflated asset prices in the past few years.  

Several now deleted Michael Burry’s tweets have also been aimed at the Federal Reserve, first for not shrinking its balance sheet enough. In October 2022, Michael Burry’s Twitter thread comment, he notes problems, this time in Treasury bond markets that are becoming increasingly unstable.

Quote

How much did Michael burry make?

Michael Burry from “The Big Short” took a big bet when he shorted the American housing market. After the housing bubble crashed in 2008, he made $100 million for himself, with investors in his fund making a further $700 million. 

 

Quote

What other movies depict the 2008 financial crisis?

• Charles Ferguson’s documentary “Inside Job” (2010);
• J .C. Chandor’s “Margin Call” (2011);
• Ramin Bahrani’s “99 Homes” (2015).

 

 

https://finbold.com/guide/michael-burry-the-big-short/

[Haji 2003]

Is Islamic prohibition against nominal or real interest?

On google I searched for the word 'nominal' and made it specific to this site. Since no hits came up, I thought I should ask the following.

My understanding is that our religion does not allow us to pay more to a lender than we borrowed. But are we talking about nominal or real sums?

Let me explain.

Inflation in the UK is running at 10% (in reality its more, but let's stick with a number the government admits). So something which costs £1000 today will be cost £1100 in one year's time.

However interest rates can be around 5%. So if you borrow £1000 now for a year you will need to pay £50 in interest. 

So a consumer could borrow £1000 today, pay £50 in interest costs and thereby avoid having to pay £1100 in a year's time.

In nominal terms yes you have paid (£50) for the privilege of borrowing. But in real terms the lender has paid you (£50) to borrow from them if you take inflation into account (this is the real interest rate).

Of course the lenders I am talking about are large banks etc. and the reason why this business model works for them is because the Bank of England has made it cheaper for them to borrow, so even at 5% they are still making good money.

But if your mar'je says that paying interest is haram - in this instance you've only made an interest payment in nominal terms and not in real terms.

@.InshAllah. what do you think?

[Haji 2003]

The following thread was split off from this one, because there's a whole set of issues surrounding SVB and a broader banking crisis:

https://www.shiachat.com/forum/topic/235081982-svb-us-banking-crisis/