Switzerland’s financial market regulator, FINMA (Swiss Financial Market Supervisory Authority), has issued a warning about growing risks in the Swiss mortgage market, citing that banks are increasingly stretching their lending criteria as property prices continue to rise.

In a recent interview with Swiss news outlet Blick, FINMA CEO Stefan Walter highlighted the potential danger of a housing market correction, stating: “The risk in the mortgage market is high, prices continue to rise, and the danger of a correction is correspondingly high.”

Banks Stretching Mortgage Lending Standards

Walter explained that some Swiss banks are loosening internal lending requirements on a significant portion of their mortgage portfolios due to heightened competition. According to FINMA, between 25% and 40% of mortgage loans may now exceed banks’ own affordability rules or internal criteria.

“We have found that the scope for granting mortgages is being exploited excessively by various banks,” Walter added, warning that this trend increases the risk of defaults and instability in the housing market. FINMA intervenes when such lending exceptions reach these levels to maintain market stability.

Rising Property Prices Intensify Risk

Switzerland’s property market has experienced continuous price growth, driven by low interest rates, high demand, and limited housing supply. While rising property values have supported bank balance sheets and household wealth, they also heighten systemic risk, particularly if mortgage lending standards are weakened.

Analysts warn that excessive lending, combined with a potential housing market correction, could expose banks to higher default rates and financial stress, emphasizing the importance of regulatory oversight by FINMA.

Regulatory Measures and Market Oversight

FINMA has reiterated that Swiss banks must adhere to strict internal mortgage criteria and maintain prudent lending practices to prevent overheating in the housing market. The regulator monitors exceptions closely and intervenes when necessary to ensure financial stability and protect both borrowers and lenders.

Walter’s warning underscores growing concerns among regulators and investors regarding the sustainability of Switzerland’s housing boom. Banks are being urged to balance competitive lending practices with risk management to prevent potential shocks to the financial system.

Outlook for Switzerland’s Mortgage Market

With mortgage lending standards being stretched and property prices continuing to climb, experts predict that FINMA will maintain a vigilant stance in 2026. The regulator’s warnings serve as a reminder that, while the Swiss housing market remains strong, the combination of high valuations and loosened lending rules increases the likelihood of a market correction if economic conditions change.