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.
As per news release issued on 29 November 2021, the Bank published a revised version of Directive No. 16 reflecting changes emanating to transitional provisions that came into force as well as feedback received by the banks. The changes also reflect some drafting refinements and clarifications.
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:
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LTV-O
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DSTI-O
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Maturity
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Category I Borrowers
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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
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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
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A maturity term of 40 years or the official retirement age - whichever occurs first:
Born on/before 1951: 61 years
1952-1955: 62 years
1956-1958: 63 years
1959-1961: 64 years
Born after 1961: 65 years
A loan may exceptionally mature beyond a borrower's retirement age subject to the conditions outlined in paragraph 18.
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Category II Borrowers
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75% LTV-O cap with a 'Speed Limit' of 20% on the volume of loans
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A stressed DSTI-O of 40% with a shock to interest rates of 150 bps
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A maturity term of 25 years or the official retirement age - whichever occurs first:
Born on/before 1951: 61 years
1952-1955: 62 years
1956-1958: 63 years
1959-1961: 64 years
Born after 1961: 65 years
A loan may exceptionally mature beyond a borrower's retirement age subject to the conditions outlined in paragraph 18.
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The Directive may be amended subject to the prevailing developments in market conditions.