KREUZLINGEN, Switzerland, Feb 14 (Reuters) – Switzerland’s long period of low interest rates and rising property prices has not become too big a risk for the country’s lenders, Swiss National Bank vice chairman Fritz Zurbruegg said on Friday.
“The low interest rates is not just a Swiss situation, we have historically low mortgage rates (…) that is a driver for property prices,” Zurbruegg told an event in Kreuzlingen, northern Switzerland.
The SNB has had a policy rate of -0.75% for five years as one of its tools to fight the rise in the safe-haven Swiss franc, which on Friday hit its highest level against the euro in nearly four and a half years.
Low interest rates have been an incentive for banks to increase their mortgage lending, Zurbruegg said, while many investors had bought properties to rent out.
“We are interested that this risk that banks have on their books from property does not become too big,” said Zurbruegg, who is responsible for financial stability at the SNB. “Our view is we are sure this risk is not too high.”
Still, there remained possible difficulties in the buy to let sector, with the percentage of properties whose rental income was less than their costs rising to 60% in 2019.
“Affordability risks are increasing, especially in the investment property sector,” Zurbruegg said, adding banks needed to keep sufficient capital on hand. (Reporting by John Revill, editing by Silke Koltrowitz)
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