* UBS Swiss real estate bubble index rises in Q4
* Index at 0.80, highest level in 20 years
* Value above 1 means market seen as risky
ZURICH, Feb 3 An index of Swiss real estate hit its highest level in nearly 20 years, highlighting the danger of the housing market overheating as record low interest rates prompt an influx into property.
The index, published by UBS wealth management, rose by 0.22 points to 0.80 points in the fourth quarter. The market is considered risky when the index goes above a value of 1.
The Swiss National Bank has repeatedly warned of the risk of a housing bubble in Switzerland, and has pledged to rein in what it sees as excessive mortgage lending.
But it is hamstrung by the need to keep interest rates ultra-low to avoid drawing more speculative international capital into the franc - already at record highs that have in turn weakened Switzerland's competitiveness and growth outlook.
Ultra low interest rates have whetted borrowers' appetite and mortgage lending in Switzerland has expanded rapidly, prompting the Organization for Economic Cooperation and Development to urge last month that it curb lending.
"The fourth quarter saw above average increases in household mortgage debt and the proportion of credit for residential property not expected for owner occupancy," UBS, Switzerland's biggest banks, said in a statement.
With the Swiss National Bank expecting prices to slip 0.3 percent and growth to slow to 0.5 percent this year an interest rate hike is not seen on the near-term horizon.
"Low interest rates should keep demand strong until the end of 2012 and prices should keep booming for the foreseeable future," UBS said. (Reporting by Caroline Copley; editing by Patrick Graham)