The Central Bank of Malta has amended its borrower-based measures for residential real estate lending, replacing the stressed debt-service-to-income test for legal persons with a stressed debt service coverage ratio of 1.3x. The new test applies a 150-basis-point interest rate shock, while natural persons remain subject to the 40% stressed debt-service-to-income limit with the same shock. For buy-to-let loans, lenders may include actual and/or prospective rental income in affordability assessments, subject to adequate internal haircuts and supporting documentation. The amendments also remove the EUR 175,000 threshold that previously exempted certain Category I loans from loan-to-value and affordability limits, bringing all such loans within scope. A targeted exemption applies to qualifying loans to government-controlled companies for residential units that must be transferred to the Housing Authority for social housing, although lenders remain responsible for prudent credit risk management. The amended rules took effect on March 26, 2026.
Central Bank of Malta2026-03-26
Central Bank of Malta amends residential real estate lending rules, introducing 1.3x stressed coverage test for legal persons
The Central Bank of Malta has introduced a 1.3x stressed debt service coverage ratio for residential real estate loans to legal persons, applying a 150-basis-point interest rate shock. It also clarified the treatment of buy-to-let rental income, removed the EUR 175,000 exemption for Category I loans and added a targeted social housing exemption. The amendments took effect on March 26, 2026.