FINMA Sounds Alarm on Swiss Mortgage Market
The Swiss Financial Market Supervisory Authority (FINMA) has issued a significant warning regarding the escalating risks within Switzerland's housing market. On Saturday, November 22, 2025, FINMA's head, Stefan Walter, stated that banks are excessively stretching mortgage lending criteria, even as property prices continue to climb, creating a high danger of market correction.
In an interview with the Swiss news outlet Blick, Walter emphasized, 'The risk in the mortgage market is high, prices continue to rise, and the danger of a correction is correspondingly high.' He added, 'We have found that the scope for granting mortgages is being exploited excessively by various banks.'
Lax Lending Practices and Competitive Pressures
FINMA's concerns stem from observations that many banks are making frequent exceptions to their internal lending guidelines. Walter revealed that 'At many banks, exceptions to internal lending criteria range between 25 and 40%.' He underscored that such practices are 'neither in the bank's nor their customers' interest.' This issue was also highlighted in FINMA's annual risk review, the 2025 Risk Monitor, which was released earlier this week.
The regulator attributes these relaxed standards partly to intense competition within the oversaturated market, where financial institutions face pressure to grow. Walter noted, 'There is a great temptation for financial institutions to make certain exceptions because things have gone well in the past.'
Broader Risk Landscape and Supervisory Measures
The mortgage market's vulnerabilities are part of a broader, increasingly complex risk landscape for the Swiss financial sector. Walter also pointed to external threats such as
- sanctions
- government debt
- geopolitical conflicts
- high stock prices
- bond risk premiums
FINMA has been closely monitoring the mortgage market for years, noting that factors like low interest rates, rising incomes, immigration, and tax incentives have consistently fueled demand and driven up property prices. Mortgage lending by Swiss banks reached approximately CHF 1.2 trillion in June 2024, with Switzerland's mortgage debt level approaching one of the highest globally relative to its gross domestic product. The Swiss National Bank (SNB) has also indicated that residential property prices are currently 15% to 40% above what fundamental factors would justify.
Conclusion: Call for Resilience and Prudence
FINMA's warning serves as a critical reminder for banks to adhere strictly to lending criteria and manage risks prudently. The regulator has previously conducted on-site inspections and stress tests, and possesses the authority to impose measures such as increased capital requirements or orders to reduce risk where excessive vulnerabilities are identified. The ongoing vigilance from FINMA underscores the importance of sustainable lending practices to safeguard the stability of the Swiss financial system against potential market corrections.
6 Comments
ZmeeLove
Another scare tactic. The market will correct itself without FINMA's interference.
Coccinella
Acknowledging the dangers of high debt, one must also consider that persistent low interest rates and strong demand have fueled this situation, not solely greedy banks. It's a multi-faceted problem.
ZmeeLove
The market definitely shows signs of overheating, but tightening lending too much could severely impact first-time buyers. A measured approach is key to avoid unintended consequences.
Habibi
It's good that FINMA is highlighting the risks, yet the article doesn't fully explore why so many people are desperate to take on high mortgages in the first place. The underlying demand factors are complex.
Coccinella
This 'warning' feels like an overreaction, potentially hurting confidence.
Donatello
While FINMA's concerns about lax lending are valid, intense competition among banks also drives these exceptions. It's a tough balance for them to maintain.