Homes for people who don’t earn enough: Banks increasingly turn a blind eye to mortgages

This rule of thumb is intended to prevent homeowners from defaulting on their obligations when interest rates rise sharply and the mortgage needs to be renewed.

However, in recent years, this rule of thirds has been increasingly ignored, according to figures from the Swiss National Bank (SNB). According to the latest published “Financial Stability Report”, banks are no longer insisting that the tried and tested affordability calculation be adhered to for every second new mortgage granted.

The rule is increasingly ignored

In 2022, the proportion of borrowers whose interest and mortgage amortization costs exceeded one-third of their income at a five percent imputed interest rate was 57 percent. A decade ago, banks ignored the one-third rule for only 39 percent of new mortgages.

Despite these figures, leading financial institutions UBS, Raiffeisen and Zürcher Kantonalbank (ZKB) have always denied that they were more flexible in granting mortgages in the past. But now, for the first time, more and more exceptions are being made to the one-third rule, says Raiffeisen boss Heinz Huber (58). “It is true that there is a slight upward trend,” Huber said in an interview with SonntagsBlick.

The CEO of the cooperative bank explains this development, among other things, with the sharp increase in housing prices. That’s why we look at each situation individually: “If someone is young, then we assume, for example, that their paid career is not over yet. That’s why we make an exception to the one-third rule,” says Huber. However, he emphasizes that this was done with a sense of proportion.

Other banks deny this

Meanwhile, UBS and ZKB insist that their affordability calculation principles have not changed in recent years. But that’s hard to believe given the SNB figures; especially since the two institutes did not want to give any specific figures.

What is certain is that the Raiffeisen Group cannot be solely responsible for the increasing number of exceptions, its 17.6 percent market share in mortgages is not enough.

The financial market supervisory authority (Finma) was alarmed. “We have noticed that affordability risks for new mortgages have increased over the last four years,” a spokesman said. Some banks apply “unsustainable lending criteria” that tend to overestimate the affordability of borrowers.