February 7, 2014 / 10:42 AM / 4 years ago

UPDATE 1-SNB looking at new ways to cool Swiss housing market

(Adds detail on focus of new measures)

ZURICH, Feb 7 (Reuters) - The Swiss National Bank is ready to explore alternative methods to cool Switzerland’s overheating property market if current macroprudential measures don’t do the job, with a particular focus on the buy-to-let sector.

Real estate prices and mortgage lending have risen strongly in Switzerland in recent years, a by-product of ultra-low interest rates set by the Swiss central bank to lower the appeal of the safe-haven franc.

The Swiss government, at the request of the central bank, is already forcing Swiss banks to maintain extra capital against the mortgages they hold. Now the SNB is discussing other options with Swiss financial regulator FINMA.

“We believe the time now is right to explore the possibility of alternative measures,” Jean-Pierre Danthine told an audience at the Finanz und Wirtschaft forum in Zurich on Thursday evening.

Danthine said the new measures should focus in particular on aspects of property-market supply and borrower burden. He did not elaborate.

A spokesman for the SNB said on Friday this referred to real estate built or bought for the purpose of renting out to generate yield.

“The mortgage growth in that segment was particularly strong recently,” the spokesman said.

The Swiss government said last month it was raising the level of capital that banks must hold against their mortgage book to 2 percent from 1 percent, after an effort to curb a housing boom failed to restrain the sector enough.

Swiss law allows for this so-called counter-cyclical capital buffer to be increased to up to 2.5 percent.

The bulk of Swiss home mortgages are held by the country’s smaller banks, rather than the dominant UBS and Credit Suisse, which are already subject to strict capital rules imposed after the financial crisis.

The SNB cannot easily raise rates; that would clash with its efforts to cap the Swiss franc. The central bank began holding down the franc in 2011 after investors fleeing the euro zone crisis bid the currency up to record levels. (Reporting by Alice Baghdjian; Editing by Toby Chopra)

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