FINMA demands stricter mortgage lending: What this means for house buyers

The dispute between the financial market authority and the banking industry reached a new level in spring 2026. On May 20, 2026, FINMA published the revised Risk Distribution Ordinance (RVV-FINMA), which will come into force on January 1, 2027. It merges two existing circulars and contains targeted adjustments to the final Basel III standards that have applied in Switzerland since January 2025.

Behind this rather technical regulation lies a bigger area of tension. For years, FINMA has accused banks of applying lending standards that are too lenient, while the Swiss Bankers Association warns that tightening them would make it even harder for young families to buy their first home. For prospective buyers, the question is how the regulatory framework for their financing may develop in the coming years.

FINMA’s specific criticisms

FINMA laid the foundation for the current debate as early as May 22, 2025, with a detailed supervisory notice on mortgage risks. It draws on a survey of 27 banks and 18 insurers, six on-site inspections, and mortgage stress tests at 13 institutions. The findings are clear: FINMA observes lending criteria in banks’ internal guidelines that are too lax and a high proportion of so-called Exception-to-Policy (ETP) financings.

ETP transactions are mortgages granted outside the bank’s internal lending rules. They are basically permitted, but according to the regulator should remain the exception and be properly justified and documented in every individual case. In practice, according to FINMA, several Swiss banks are recording double-digit ETP quotas in new business. The regulator sees this as a systemic risk, especially in the event of a potential correction in the real estate market.

FINMA also criticizes the valuation of properties. It observes the use of excessively low capitalization rates for investment properties, which leads to optimistic market values and thus to higher lending amounts. The regulator expects institutions to introduce segment-specific requirements for loan-to-value and amortization, with lower loan-to-value limits and higher amortization requirements for investment properties.

The banking industry’s position

The Swiss Bankers Association (SBVg) rejects the criticism in this form. Their argument: the existing self-regulation has been in place for years, and according to the National Bank’s assessment, Swiss banks are sufficiently capitalized to withstand even major shocks in the real estate market. The SNB’s 2025 stability report supports this view.

From the industry’s perspective, ETP financings form a necessary corrective in the rigid affordability regime. Typical cases are young first-time buyers with incomes just below the bank’s internal requirement but stable career prospects. Or retirees with low pension income whose mortgage has already been largely amortized. In both situations, a rigid application of the 33-percent rule would not be economically justified.

According to the SBVg, a general tightening of affordability rules would further restrict the owner-occupied housing market for younger households. The result would be even greater pressure on the already strained rental market and, indirectly, less funding for new housing construction. The industry continues to favor principles-based self-regulation via the SBVg guidelines, which have also been adjusted to the final Basel III requirements since 2025.

Which tightenings are realistic

A comprehensive overhaul of the affordability calculation is not expected in the short term. In spring 2024, FINMA recognized the updated SBVg self-regulation as the minimum standard, thereby confirming the current framework. The new Risk Distribution Ordinance does not directly intervene in the affordability check, but instead primarily addresses the banks’ capital requirements.

More realistic than legislative intervention is a gradual supervisory pressure on individual institutions. FINMA has supervisory tools that allow it to require higher capital from banks with especially high ETP ratios or aggressive property valuations. Such a pillar-2 surcharge makes risky loan portfolios more expensive for the institution and indirectly leads to tighter lending.

Further qualitative tightenings through self-regulation are also possible. Potential measures include a binding cap on ETP quotas, a stricter definition of permissible exceptions, or additional documentation requirements. There is also discussion about increasing the notional interest rate, which currently stands at 4.5 to 5 percent in the industry, or raising the equity requirement above the current 20 percent.

What this means for prospective buyers

For households that want to buy a home in the next two to three years, little will change for now. The current self-regulation remains in force; affordability will continue to be calculated with a notional interest rate of around five percent, incidental costs of 0.8 to 1 percent of the lent value, and the one-third rule for income. The second mortgage must be amortized to two-thirds of the market value within 15 years or by retirement.

However, those planning financing at the edge of affordability should be aware that banks’ leeway for ETP cases is likely to shrink. A financing that would just about be approved today might encounter stricter internal requirements in two years’ time. It is worthwhile to start discussions with multiple institutions early—and not rely on a single offer.

In practical terms, this means: More equity reduces dependence on banks’ internal tolerance. Those who contribute 25 or 30 percent of their own funds instead of just the minimum 20 percent move into a lower-risk category and usually receive better terms as well. Realistic income planning and conservatively calculated affordability are not a disadvantage in a stricter environment, but rather an insurance against unpleasant surprises at the next renewal.

Regulation can also play a role for existing mortgages. Banks review affordability with each renewal. Anyone who received borderline financing in recent years should already prioritize reducing the second mortgage and building additional reserves during their current fixed-rate mortgage period.

A marathon, not a sprint

The regulatory debate about mortgage lending will continue to occupy the industry for years to come. A rapid and harsh tightening is unlikely; rather, there is likely to be a gradual movement toward more conservative standards. With its notices, the new risk distribution ordinance, and targeted on-site inspections, FINMA has already narrowed the scope.

For the Swiss mortgage market, this means a period of heightened attention. Anyone buying a property or renewing existing financing today should not only look at current terms, but also bear in mind that lending practices may change over the next renewal period.

Sources: FINMA press release RVV of 20.05.2026
FINMA supervisory notice on mortgage risks of 22.05.2025
Die Volkswirtschaft: Regulation in the Swiss mortgage market
Swiss Bankers Association