Swiss residential property risks growing in buy to let, according to Swiss National Bank

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On 21 June 2018, the Swiss National Bank (SNB) announced its decision on interest rates, which it left unchanged.

Fritz Zurbrügg, Thomas Jordan and Andréa Maechler

Switzerland’s economy has been sailing into the headwinds of a strong currency since the SNB scrapped its exchange rate cap in January 2015 and the Swiss franc briefly went beyond parity with the euro.

To weaken the currency, the SNB introduced negative interest rates and went on a spree of asset buying.

Yesterday, the Bank said it will maintain its -0.75% interest rate and continue to buy assets as required. 5 years ago, the the SNB set up an operation in Singapore so that it can buy and sell assets around the clock.

High on the list of SNB concerns is Swiss residential property, in particular, buy to let investments. Low mortgage rates have drawn more investment into the sector.

In a statement, Fritz Zurbrügg from the SNB said that affordability risks for new mortgage loans in the residential investment property segment rose significantly last year. Concern is reflected in high loan-to-value and high loan-to-income ratios. Loans in this asset class are particularly vulnerable to a substantial interest rate rise coupled with a real estate price correction, he said.

More on this:
SNB statement (in English)

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