From year to year, and even from quarter to quarter, the Swiss National Bank observes the evolution of the mortgage market and, through it, that of the real estate market. The stakes are high, numerically of course, since mortgage loans form the bulk of bank credit for the banks that engage in it, and mortgage debt per capita exceeds practically everything that happens somewhere else.
There are therefore two excellent reasons to follow the matter closely: if some new fact shifts by an inch the cursor of the risks incurred by some (the banks) and others (the borrowers), considerable sums of receivables and of debts can set in motion.
The bitter memory of the real estate crisis triggered at the end of the 1980s by less sudden than unexpected monetary tightening certainly made banks more cautious and supervisory authorities more attentive to risks. But nothing helps: mortgage credit continues to grow faster than music, and households go into debt beyond what, for some of them only the SNB, who knows why, does not more likely to be assessed publicly, represents a bearable share of disposable income.
“Mortgage debt per capita exceeds anything else.”
Consider the numbers. In the space of ten years (from 2012 to 2021), household mortgage debt has swelled by a good third, to reach 900 billion francs, when gross domestic product only increased by 17% to 742 billion. In front of this big liability, there is of course a real estate asset of respectable dimensions, of the order of 2382 billion, in progression, him, of almost 45%! The fortune of the Swiss is therefore not a legend.
Nevertheless, this thick mattress of material wealth says nothing about its distribution, certainly unequal between haves and have-nots, but even more dangerously distributed, from the point of view of risks of course, between old and new owners. It is above all the situation at the margin, that in which “first-time buyers” in banking parlance evolve, which deserves attention. After a decade of low interest rates that hinted at the possibility of finally getting within reach of a real home, hasn’t the calculations been turned upside down by an increase in all the determining factors: those mortgage rates that suddenly double, and it’s not over, construction costs which fly away, and calamities, whether regulatory, prudential or cyclical (the return on September 30 of the countercyclical capital buffer), which almost completely obstruct access to bank credit for a majority of young households.
And then, for many of those who thought they were protected by fixed-rate loans, and more broadly for all those who, by a very Swiss atavism, stuck to the practice of not amortizing, or if little, their mortgage debt, for all of them, the flashback will be painfully felt, if inflation, which, moreover, attacks ruthlessly on current expenses and maintenance costs were to go s accelerating and continuing, it is feared, to erode disposable income.
A sharp break in residential real estate prices does not seem to be in sight, as demand remains strong and supply, almost totally inelastic, as the SNB describes it, is unlikely to increase. Nevertheless, as you have been told, extreme vigilance is called for and the dangerous game in which certain banking establishments indulge in “skimming the code” to increase their market share would justify a rein in supervisory authorities (FINMA, SNB) may be preparing and, if necessary, should not hesitate to engage.
Posted today at 07:47
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– The mortgage trap closes
OpinionMarian Stepczynski – Journaliste
Posted today at 07:47