1.Let's do a quick comparison a 5% apr mortgage over 20 years for a property valuing in at £200, 000 will cost in total £388,233 that is a total of £188,223 in interest, taking 33 years for repayments of £1000 per month.
Conversely those who save up will only be paying 2.5% of their annual saving. If the price of the house is £200,000 and they can save £1000 each month, then that comes to a total zakat giving of £59,000 over 22 years to save up to £205,000 ...
not quite.
the first person lives in his own home for these 22 years. the second person still pays rent for 22 years to a third party. rent amounts are comparable with monthly mortgage payments.
at the end of 22 years, first party owns his home, second party owns his home, and has spent more than double the money on it all.
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Doesn't apply the pricier the mortgage the juicier will be the interest and harsher consequences of defaulting that is if the bank allows them to take a bite of the elephant in the first place.
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not true again. the interest rate, in the US at least, does not depend on the size of your mortgage but your credit score. if you don't have sufficient means to make the monthly mortgage payment, the bank will deny you the mortgage. but if this is a rich person trying to avoid zakat payment, thats not an issue.
basically what you are saying is, look i'll keep the house, but treat the loan on it as a liability, as if i dont have anything to show for it. that is not true. your house is as much an investment vehicle that can lose and gain value as say, stocks or gold. if you decide not to include it in your assets, you shouldnt include the liability associated with it to get yourself a break from zakat.
The people who save up must pay zakat on what they save, the others who choose to go the route of mortgage will be doing so on concessional grounds ... The modern world has altered the architecture of how people live. Fatawa have been issued to people living in such climates allowing them to take an interest based loan like a mortgage if their needs dictate it. Also, Islamically we only need to pay zakat their is no income tax as such, but by having to pay income tax as well as zakat it is increasingly harder for people to save up to buy a home and the homes in such a market are artificially inflated in value because more and more of the public can buy their homes on mortgages so when they sell their homes they expect more in return and you get the run away effect. So you are correct that this situation forces people to go down the mortgage route.
You are also correct about the people who buy have their asset, but the ones who don't will be paying a rent. Now that rent may not be the same as the value of the house they intend to buy ... But for sure Islamically they will not reach for the sky where other methods may make them do that. Also, notice how zakat is geared towards giving money back to society not to a localised set of people who are already rich ... The interest bearing loans make the richer people more richer. It is both a type of control and blessing that you are failing to understand.
And this argument about the loan and asset being connected does not make sense to me. Having the home before it is paid for is a benefit ... So is the loan a liability or not? Of course it is ... It must be paid back. That is what liability means. If however, the property was not going to be lived in but used as means to getting a secondary income through the letting market then yes it is subject to zakat.
I didn't mean interest rates would vary, I meat the overall amount of interest to pay would be more.
And the interest free loan route would still be best
It's funny that you arguing from a capitalistic point of view and what appears to be better for the pocket . .. But that should not be the main driver for our decisions ... It should be what complies with our principles the most.