Home loans

I have long considered Lawrence Zammit’s weekly articles on business and finance a must-read. Apart from demonstrating a social conscience by what he writes, he has a remarkable ability of making Times of Malta readers understand even the more complicated aspects of matters concerning finance and economics.

In his article ‘Analysing income inequality in Malta’ (June 23), he referred to a recent survey indicating that the average first-time home buyer now spends up to €250,000.

He rightly concludes that it takes young people around 10 years’ salary to purchase their first home.

Zammit further says that his personal anecdotal evidence suggests that, 35 years ago, it took people six to seven years’ salary to buy their first home. This calculation is based on the situation in 1988. From my own experience, I can go back even further; to 1960 when, with the help of a bank staff loan (at a much lower interest rate than the then market rate of eight per cent), my first matrimonial home was a small bungalow in St Julian’s that cost four times my then annual salary - the maximum permitted under the staff loan scheme.

Average first-time home buyers spend up to €250,000.

Of course, in those days, expectations of newlyweds were far lower than they are nowadays. Surely, this is the cause of the fact that a four-year yardstick used 63 years ago has risen to 10 years now.

I accept that one has also to take account of the effect of inflation on building costs and allied services over such a long span of time.

I would add that, in 1968, I was responsible for setting up, as its first manager, Barclays Finance Corporation (Malta) Ltd, which was the first financial institution in Malta to make available long-term loans for house purchase and commercial or industrial projects.

Retail banks were restricted by Central Bank of Malta directives to making loans for a maximum term of five years. Thus, the innovation was a huge success.

The yardstick used for home loans was a maximum of four times one’s annual income net of tax and a maximum repayment term of 25 years.

Anthony Curmi – St Julian’s