Financial Stability

Borrower-Based Measures

On 29 March 2019, the Central Bank of Malta published Directive No 16 on the Regulation on Borrower-Based Measures. The objective of these binding measures is to strengthen the resilience of lenders and borrowers against the potential build-up of vulnerabilities stemming from the real estate market. The Directive will come into force on 1 July 2019.  The Measures were introduced in collaboration with the Malta Financial Services Authority (MFSA) following a recommendation by the Joint Financial Stability Board (JFSB).

A public consultation was launched on 1 October 2018 and a Feedback Statement was published on 29 March 2019. The Feedback Statement incorporates feedback from respondents and the Authorities following the public consultation.

The measures set limits on the loan-to-value at origination (LTV-O), debt-service-to-income at origination (DSTI-O) and maturity, as follows:

 

LTV-O

DSTI-O

Maturity

Category I Borrowers

90% LTV-O cap with a 'speed limit' of 10% on the volume of loans, for loans with a market value in excess of EUR175,000

A stressed DSTI-O of 40% for loans with a market value in excess of EUR175,000 with a shock to interest rates of 150 bps

A maturity term of 40 years or the official retirement age - whichever occurs first:

1952 - 1955: 62 years

1956 - 1958: 63 years

1959 - 1961: 64 years

Born after 1961: 65 years

Category II Borrowers

Gradual Phase-in:

1st year:

85% LTV-O cap with a 'speed limit' of 20% on the volume of loans

2nd year:

75% LTV-O cap with a 'speed limit' of 20% on the volume of loans

A stressed DSTI-O of 40% with a shock to interest rates of 150 bps 

A maturity term of 25 years or the official retirement age - whichever occurs first:

1952 - 1955: 62 years

1956 - 1958: 63 years

1959 - 1961: 64 years

Born after 1961: 65 years

The Directive may be amended subject to the prevailing developments in market conditions.