Fritz Zurbrügg: Mortgage and real estate markets: current developments pose risks to financial stability

Speech by Mr Fritz Zurbrügg, Vice Chairman of the Governing Board of the Swiss National Bank, at the University of Lucerne, Lucerne, 31 August 2021.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Central bank speech  | 
03 September 2021
by Fritz Zurbrügg
PDF full text
(1,009kb)
  |  19 pages

Ladies and Gentlemen

"House prices hit record highs", "Swiss mortgage rates sinking again"1 – these Swiss newspaper headlines from recent months show that developments on the mortgage and real estate markets are currently a topic of hot debate. These markets have undisputedly been highly dynamic over the past years in Switzerland and most recently also in many other advanced economies. Average prices of single-family houses and privately owned apartments, for example, have risen by over 80% in this country over the last 15 years. Similar growth can be observed in the volume of mortgage lending at Swiss banks (cf. slide 1). In the prevailing low interest rate environment, mortgage rates have never been so attractive.

The Swiss National Bank monitors these developments very closely, since contributing to financial stability is part of its mandate. The mortgage and real estate markets play a key role in the banking sector and are thus of great importance to overall financial stability. According to our assessment, the strong growth in these markets over recent years has given rise to vulnerabilities, and risks to financial stability have increased.

In today's speech, I would like to explain in more detail the SNB's perspective on risks in the Swiss mortgage and real estate markets. First, I will describe how our perspective on these markets can be explained by our mandate, and how we fulfil our remit in this area. I will then outline our assessment of current developments. In doing so, I would like to show why, over the past ten years, the SNB has repeatedly warned of vulnerabilities on the mortgage and real estate markets and contributed to measures aimed at containing the associated risks.