HSBC Malta has backtracked on a decision to double its minimum down payment requirement for home loans, without explanation.

The publicly-listed bank issued a statement to the Malta Stock Exchange on Friday afternoon assuring investors that it “continues to offer home loans in line with its proposition up to a maximum of 90 per cent loan-to-value, while continuing to align to its risk appetite and credit criteria”.

HSBC said its website was being "updated to that effect".

Earlier in the day, Times of Malta revealed how the bank had quietly slashed its maximum loan-to-value offered to 80 per cent, from the previous 90 per cent.

The loan-to-value figure represents the percentage of a property’s value that a mortgage lender is willing to provide, with the buyer required to make up the balance through a down payment. 

Local retail banks traditionally offer home loans with a minimum down payment of 10 per cent. HSBC’s unannounced change meant that property buyers seeking a loan with the bank would be required to fork out 20 per cent of their property’s value.

A backtrack, with a caveat

But by 6pm on Friday, the bank’s various web pages focused on home loans had been updated to note that the bank offered a maximum loan-to-value of 90 per cent for primary residences.

The backtrack, however, comes with a caveat: the 90 per cent figure is “subject to internal lending criteria”, the revised HSBC webpages state.

A change requiring a down payment of at least 25 per cent on home loans for secondary residences remains in effect. Previously, the bank required a minimum 15 per cent down payment for such loans.  

A bank spokesperson did not respond to questions about the changes.

Three versions of the same home loan offer. Version 1 is taken from an archived version of HSBC's web page, with versions 2 and 3 both captured on February 17, 2023.Three versions of the same home loan offer. Version 1 is taken from an archived version of HSBC's web page, with versions 2 and 3 both captured on February 17, 2023.

Times of Malta also reported that HSBC also raised its interest rates for home loans by 40 basis points, moving the annual percentage change rate to 3.1 per cent from the previous 2.7 per cent.

The bank made no change to that stated 3.1 per cent Annual Percentage Rate of Charge when it updated its web pages on Friday afternoon to backtrack on its minimum down payment requirements.

Banking experts who spoke to Times of Malta said HSBC's initial decision was inexplicable. One banker said the share of non-performing loans in Malta was very low, especially compared to other EU states.

Other retail banks pledge no changes

Prime Minister Robert Abela told Times of Malta on Friday morning that he had been informed about HSBC's changes on Thursday. He urged other retail banks to resist following HSBC’s lead. 

Abela made the plea during a press conference to unveil details about a €10,000 cash grant promise to first-time property buyers.

Malta’s other major home loan lenders were quick to offer reassurances: spokespersons for both Bank of Valletta and APS Bank told Times of Malta that they have no plans to revise minimum down payment requirements for home loans.

“The bank has at this point in time no intention to change any of the terms and conditions on its home loan products,” a BOV spokesperson said.

It said that it would "continue to monitor the state of the residential real estate sector, movements in interest rates and its funding resources, as well as possible changes in regulatory requirements in determining its policies with respect to home loans and other products.”

BOV has around €2.7 billion worth of home loans on its books, making it the largest residential lender in Malta. By comparison, HSBC’s residential loan book totalled around €2 billion by the end of 2021.

APS Bank also said it is not planning any changes. Bank CEO Marcel Cassar told Times of Malta that they ruled out any plans to increase home loan deposits. 

“It’s not on the cards, we are a community-based bank, and we have a commitment to support first-time buyers,” Cassar said. 

Times of Malta also called BNF Bank, posing as a prospective customer and asking about home loan terms. A customer service representative assured that its down payment requirements remain unchanged, with a 10 per cent minimum in place.

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