The Swiss financial regulator has warned banks that rules on mortgage lending may be further tightened if they fail to control their appetite for dishing out real estate credit. Loans tipped the one trillion franc mark in 2018 and continue to swell, particularly in the buy-to-let market.
This content was published on
2 minutes
When not covering fintech, cryptocurrencies, blockchain, banks and trade, swissinfo.ch's business correspondent can be found playing cricket on various grounds in Switzerland - including the frozen lake of St Moritz.
At its annual media conference on Thursday, the Swiss Financial Market Supervisory Authority (FINMA) turned its attention to a trend of investors putting their money into bricks and mortar, with the support of banks.
A stress test carried out by FINMA late last year on 18 banks showed worrying signs of what might happen once rock bottom interest rates start to rise. Such an event would increase the burden on investors paying back loans and likely have a negative impact on the value of the properties they own. This could lead to defaults on loans issued by banks.
FINMA director Mark Branson said he is determined to avoid the type of financial crisis that Switzerland experienced in the 1990s when the housing market collapsed. “The mortgage market is critical to the stability of the Swiss financial centre,” he said. “It is too big to fail.”
Regulatory measures
The volume of mortgage loans in Switzerland has doubled in the last 15 years, and by 45% in the last decade since the global financial crisis, FINMA said. At the same time, 70,000 homes stood empty in mid-2018, realising no rental income. Branson said this represented a “ghost town” the size of the Swiss capital Bern, which “greatly increases the risk of price corrections and loan defaults.”
Branson invited banks to toughen up their self-regulatory measures in relation to the buy-to-let market. “The alternative would be to raise capital requirements for investment property,” he warned.
Popular Stories
More
Foreign Affairs
How a top Swiss university is screening Chinese students
Two decades after tsunami, Swiss tourists flock to Southeast Asia
This content was published on
Twenty years after a catastrophic tsunami in Southeast Asia, the region is again a top destination for Swiss, including at Christmas.
Swiss forests better equipped for storms 25 years after Lothar
This content was published on
Twenty-five years after Hurricane Lothar wreaked havoc in Switzerland, the country’s forests are now better prepared, experts say.
Media: Swiss medical services done abroad are billed at Swiss rates
This content was published on
In Switzerland, some medical services carried out abroad are still billed at Swiss rates, despite costing less, RTS reports.
This content was published on
Sophie Hediger, a member of the Swiss national snowboard cross team, has died in an avalanche in Arosa. She was 26 years old.
This content was published on
Several Swiss films exceeded the 100,000 admissions mark worldwide in 2024 and received widespread praise at international film festivals.
Swiss Alpine resorts covered in white gold for Christmas
This content was published on
Many areas at low altitudes in Switzerland are enjoying a blanket of snow. In the mountains, intense precipitation has delighted skiers.
SWISS makes emergency landing in Austria after smoke in cockpit
This content was published on
Swiss International Airlines (SWISS) made an emergency landing of an Airbus in Graz, Austria on Monday evening after engine problems.
If you want to start a conversation about a topic raised in this article or want to report factual errors, email us at english@swissinfo.ch.
Read more
More
Swiss homeowners face tighter mortgage rules
This content was published on
Despite a tepid economy, the rock-bottom rates continue to pump Swiss property prices higher, a development that is worrying financial regulators seeking to avoid a bubble. In a bid to staunch the flow of credit for real estate, the finance ministry has proposed stiffer capital requirements for Swiss mortgage lenders, following direction given by the…
This content was published on
As of September 30, banks must boost their capital buffers against domestic mortgage loans by another one per cent. This would mean around SFr3 billion ($3.3 billion) extra capital being tied down in the banking system. The government issued the order on the recommendation of the Swiss National Bank (SNB) as property prices in major…
You can find an overview of ongoing debates with our journalists here . Please join us!
If you want to start a conversation about a topic raised in this article or want to report factual errors, email us at english@swissinfo.ch.