Danthine Says SNB Can’t Use Rates Now to Cool Real Estate Market

The Swiss National Bank can’t use interest rates to temper high residential property prices, Vice President Jean-Pierre Danthine said.

“For us there is no question, interest rate policy is not at our disposal,” Danthine said in a speech at the Swiss Society of Economics and Statistic’s annual conference in Bern today.

The SNB’s policy of zero interest rates has kept mortgages cheap, causing residential property prices to climb to the highest level in more than two decades. Danthine said in February that the central bank can’t raise rates while it’s franc ceiling, introduced in 2011 to ward off deflation and a recession, is in place.

“The dynamics of the credit sector, mortgage sector have been very strong and put us in the danger zone,” Danthine said. “Our message is simply we have to be prudent.”

In a bid to prevent mortgage writedowns and ensure what the central bank calls a “soft landing,” the government last year forced banks to hold additional capital on mortgages. That buffer, which it doubled to 2 percent in January, can be raised as high as 2.5 percent.

“We have seen some effect of these tools already,” Danthine said. “Not enough, but we do see some effect.”

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