We would like to ensure that you are still receiving content that you find useful – please confirm that you would like to continue to receive ILO newsletters.
08 August 2014
On June 23 2014 the Swiss Bankers Association decided to amend two self-regulatory guidelines concerning the mortgage market. The association published new versions of guidelines for the examination, evaluation and treatment of loans guaranteed by pledges on real estate and guidelines on minimum requirements for mortgages (known together as the Guidelines on the Granting of Mortgages).
On July 2 2014 the Swiss Financial Market Supervisory Authority approved the amended self-regulatory guidelines and recognised them as minimum regulatory standards.
The guidelines apply to both owner-occupied residential properties and investment property apartment buildings. The minimum requirements apply to new operations and credit increases. However, they do not apply to:
In the revision, the amortisation period for the repayment of one-third of the lending value of the property will be reduced from 20 years to 15 years and the amortisation must be effected in regular tranches (linear). Swiss banking practice shows that only second-ranked mortgages or other riskier mortgages are subject to the repayment obligation. This practice is based on Article 807 of the Civil Code, which provides that claims for which a charge on immovable property has been recorded in the Land Register are not subject to prescription. Hence, in practice, first-ranked mortgages are subject to no repayment obligation.
As regards the financing of real estate purchases and transfers, the new version of the guidelines provides that the evaluation is now carried out according to the 'lower of cost or market' principle, under which the collateral value corresponds to the lowest amount between the market value and purchase price. This principle applies to all types of building for a period of at least 24 months following the transfer, with the exception of credit increases, for which the amount of the increase is allocated to investments in the mortgaged estate. In case of a transfer at a preferential price between natural or legal persons which are economically and/or legally related, exceptions to the principle of the lowest value are possible. This applies, for example, when a property is sold within a family or a group of companies.
The revision of the guidelines also involves the eligibility of a second income from a spouse when assessing the financial sustainability of the borrower. Second incomes are now normally eligible only in the case of joint and several liability.
On July 2 2014 the federal government discussed the status of the real estate and mortgage markets and welcomed the increase in the minimum requirements in the guidelines. It does not, therefore, envisage introducing any additional measures to suppress the demand for mortgages at present.
The new version of the guidelines will enter into force on September 1 2014.
For further information on this topic please contact Christophe Rapin, Christophe Pétermann or Daphné Lebel at Meyerlustenberger Lachenal by telephone (+41 22 737 10 00), fax (+41 22 737 10 01) or email (email@example.com, firstname.lastname@example.org or email@example.com). The Meyerlustenberger Lachenal website can be accessed at www.mll-legal.com.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
ILO is a premium online legal update service for major companies and law firms worldwide. In-house corporate counsel and other users of legal services, as well as law firm partners, qualify for a free subscription.