Switzerland: Financial Sector Assessment Program-Technical Note on Macroprudential Policy and Real Estate Risks

International Monetary Fund

No 2025/298, IMF Staff Country Reports from International Monetary Fund

Abstract: This Technical Note examines the evolution and impact of Swiss macroprudential policy tools targeting real estate markets. The paper reviews the institutional aspects of the macroprudential framework. The note also looks at the real estate market dynamics since the 2019 Financial Sector Assessment Program (FSAP) and highlight key financial stability risks. Rising systemic risks from the real estate market call for new measures to be implemented promptly. The FSAP recommends the introduction of a debt-service-to-income (DSTI) cap in addition to the existing loan to value (LTV) caps. While the LTV caps set out in the self-regulation seem to have been effective, the share of loans not meeting FINMA’s affordability benchmarks is high and has risen in recent years. The FSAP’s analysis shows that in around 50 percent of owner-occupied mortgage lending and around 60 percent of investment-property related lending since 2017, stressed debt service and maintenance costs exceed the income-based affordability threshold. A counterfactual analysis suggests that introducing a DSTI cap would be a well-suited measure to address the riskiest types of mortgage lending to households.

Keywords: mortgage lending; MACROPRUDENTIAL Policy; IMF staff; DSTI cap; Macroprudential oversight; Macroprudential policy; Mortgages; Countercyclical capital buffers; Loans; Financial sector stability; Global; Europe (search for similar items in EconPapers)
Pages: 51
Date: 2025-11-13
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