Mortgage financing – tougher self-regulation
Since last August 26, FINMA (the Swiss financial market supervisory authority) has recognized the modified self-regulation of the Swiss Bankers Association as a minimum standard in the sector of mortgage financing for investment properties.
So, from January 1, 2020, the modifications concerning collateral and the amortization of mortgage credit intended for investment properties will make requirements tougher. In summary, the borrower must now provide at least 25% of the collateral value in the form of own funds, instead of the 10% previously required. The principle of minimal value – which represents the financing of the gap between the purchase price and the value of collateral exclusively from own funds – still applies. Moreover, the mortgage debt must be amortized by two-thirds of the value of the collateral within ten years, compared with 15 years currently.
The aim, clearly stated by the Swiss Bankers Association, is to contribute to the stabilization of the real estate and mortgage market in a targeted and effective way. With this inclusive measure, the FINMA has recognized these adaptations that are “going in the right direction”.
This view is shared by e-Potek and its director, Yannis Eggert, who approves of the changes, which only target institutional investors. “We are going through a period of economic turbulence in which the negative interest rates imposed by the SNB push financial institutions to invest cash in mortgage loan vehicles. This is why we will see an increasingly tougher stance from regulators. We hope that they will avoid targeting the primary residence financing sector, which has been very complex for several years now.
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