These measures include, for example, the Federal Council’s decision in 2012 to increase the capital requirements for mortgage loans with a high LTV ratio, i.e. a high ratio of the mortgage loan to the value of the pledged property. Furthermore, banks’ selfregulation rules were revised and tightened in the years 2012, 2014 and 2019, which, in particular, imposed more stringent requirements regarding the amortisation of mortgage loans and own funds brought in by borrowers. An important factor was also the activation of the CCyB in 2013 and its subsequent increase to 2% in 2014. The CCyB was deactivated last year. This decision was made against the backdrop of the coronavirus crisis in order to  Page 10/12  broaden the scope for banks to lend to companies in these exceptional circumstances – in spite of the existing vulnerabilities on the mortgage and real estate markets. The measures implemented between 2012 and 2019 were important to strengthen the banks’ resilience and curb the increase in vulnerabilities. 12 They could not, however, fully prevent the rise in risks. The current situation will therefore continue to demand our full attention. I would like to highlight two reasons: First, current price developments in the residential property sector show that there is no reason to sound the all-clear. As outlined in our Financial Stability Report published in June, the coronavirus pandemic has not slowed down price momentum. On the contrary, price growth in the residential real estate market has in fact increased.
the costs resulting from interest payable, amortisation and maintenance – do not exceed one-third of the borrower’s gross income. In the case of residential investment property, these costs should not exceed the rental return. The term ‘residential investment property’ comprises apartment buildings as well as privately owned apartments and single-family houses that are rented out. Slide 3 shows the share of new mortgage loans at various imputed interest rates that do not meet the conditions of this standard metric, i.e. where the loan-to-income (LTI) ratio is too high. The data illustrate that affordability risks have risen in all segments since 2014 and are currently at historically high levels. The sharpest increase has occurred in the residential investment property segment. Between 20% and 30% of newly granted mortgage loans for residential investment property would be deemed unaffordable if the mortgage interest were to rise to 3%. Should the interest rate climb to 4%, this proportion would amount to around 40%. In the owner-occupied residential property sector, these shares would come to roughly 20% and 30% respectively. These figures on affordability risk do not mean that, in the event of an interest rate rise, mortgage loan defaults of this magnitude would actually occur. After all, the calculation used here considers only borrowers’ income and not, for example, their general financial situation. Moreover, the figures are based solely on newly granted loans, not outstanding loans. Overall, however, the figures do show that the debt level of mortgage borrowers compared to their income has increased sharply in recent years.