The Unassuming Economist

“Elevated exposure to mortgage debt continues, and low interest rates could rekindle a credit-driven upswing in house prices (…) [the authorities should] stand ready to adopt new macroprudential measures if credit and house prices again turn up, with a focus on the build-to-let segment”, says IMF’s latest report on Switzerland.

The report also says that “House prices relative to income have grown significantly since the great recession, and while prices have recently stabilized, price to income ratios remain stretched. Average debt per borrower is very high given the relatively low rate of home ownership. A prompt response will be needed if greater competition in credit markets further bids down interest rates and spurs a resurgence of mortgage lending or an acceleration of house prices. The response should target the build-to-rent segment where activity is currently brisk and where larger risk weights and/or faster amortization relative to owner-occupied properties is appropriate to reflect the international tendency for higher default and loss rates on these loans. Greater recourse to legally-binding regulation in preference to banks’ self-regulation could ensure any needed changes are implemented in timely manner and that uniform standards apply to all mortgage providers”