Sovereign Money and the Mortgage Market: What the MoMo Demands Would Mean

After the clear rejection of the Sovereign Money Initiative in June 2018, the topic was considered politically settled in Switzerland. Seven years later, the Monetäre Modernisierung (Monetary Modernization, MoMo) association is trying a second run, this time not via a new popular initiative but via direct proposals to federal parliamentarians. MoMo president Ewald Kornmann sent out a paper in the summer of 2026 that deals in large parts with the mortgage market. For homeowners and prospective buyers, the question arises as to what the demands would mean in concrete terms, should they one day find their way into regulation.

Where the Debate Comes From

The Sovereign Money (Vollgeld) idea assumes that commercial banks create new money through lending, so-called book money. MoMo argues that this mechanism has essentially contributed to Swiss property prices reaching ever new record highs over three decades. The core sentence reads: the more mortgages are granted, the more strongly property prices rise. Conversely, stricter lending rules and higher amortization requirements should lead to bank balance sheets shrinking and prices stabilizing.

This causal chain is disputed among economists. The National Bank, the major university institutes and market research houses point to structural factors: sustained high immigration, tight construction activity, real income growth and the internationally low interest-rate level. The argument against the MoMo thesis can be tested empirically: UBS's balance sheet has shrunk noticeably after the takeover of Credit Suisse, but a decline in property prices has not materialized. If bank balance sheets were the central price driver, the contraction would have had to leave traces.

The Concrete Demands in Detail

MoMo formulates four thrusts that would directly affect the mortgage market.

Consistent amortization. Today, a mortgage must be paid down to two-thirds of the loan-to-value ratio within 15 years, usually via indirect amortization into Pillar 3a (Säule 3a, the tax-privileged pension savings tier). MoMo demands a significantly stricter handling, with clear obligations for full repayment over the entire term. In practice, this would mean: no postponement through additional tranches, no reliance on rising property values, no pure interest-only mortgage over decades.

Higher equity ratio. Instead of the currently applicable 20 percent equity, of which ten percent may not come from the second pillar (Pensionskasse, the employer pension fund), a rise toward 25 or even 30 percent could be discussed. This would reduce the number of first-time buyers overnight.

Stricter affordability rules including amortization. In today's affordability calculation, interest, ancillary costs and amortization together may not amount to more than one-third of gross income. If the amortization component is inevitably increased, the maximum financeable purchase amount falls noticeably.

More cautious valuations. MoMo demands a more restrictive application of the hedonic models with which banks estimate the market value of a property. This would push the loan-to-value basis downward and correspondingly reduce the maximum possible mortgage amounts.

What This Means for Homeowners

For existing owners, the short-term consequences are limited. Existing contracts enjoy grandfathering protection, retroactive effect would hardly be politically feasible. Anyone already living in their own home would primarily encounter points of contact at the next refinancing, for example if the bank suddenly demands a higher amortization rate or a lower loan-to-value.

The picture is different for prospective buyers and young families. Higher equity requirements would significantly raise the threshold for home ownership. An example: at a purchase price of CHF 1,200,000, today's regulation requires CHF 240,000 in equity. An increase to 30 percent would mean CHF 360,000, a surcharge of CHF 120,000. For many households already laboriously saving up their equity base, this would be a knockout criterion.

In terms of affordability, the stronger amortization component would raise the monthly burden. Anyone currently calculating with an indirect amortization via Pillar 3a and thereby taking along tax advantages would have to reorganize. For customers shortly before retirement, the required full repayment could collide with their own time horizon.

How the MoMo Ideas Compare to Existing Regulation

With Basel III, the FINMA self-regulation guidelines and the countercyclical capital buffer, Switzerland already has a dense set of rules that closely control lending in the mortgage business. The FINMA Guideline 02/2025, which entered into force in 2025, has noticeably tightened the requirements for investment properties, as well as the treatment of second homes. The question is therefore not whether the market is regulated, but whether the existing instruments are sufficient.

From the perspective of the SNB and FINMA, the answer so far is yes. The actual default rate in Swiss mortgage business has been at a few basis points for years and is thus far below the European average. The reason is not least the aforementioned self-regulation of the banks and the traditional credit culture, which places buyers under greater obligation than in many neighboring countries. According to this reading, an additional protective ring in the form of the MoMo proposals would primarily further complicate access to home ownership without addressing a concrete shortcoming.

How Realistic Is Implementation

The political prospects are slim. The Sovereign Money Initiative failed in 2018 with 75.7 percent no votes, so far the clearest verdict against a fundamental reform of the monetary system. The Federal Council and the National Bank jointly rejected the initiative and their arguments have been regularly confirmed since. From parliament, too, there are hardly any signs that the proposals could find majorities. The initiative by Kornmann is therefore likely to have primarily a signaling effect and rekindle the debate on bank regulation.

Selective adoption of individual elements would, however, be conceivable. The idea of stricter amortization, for example in the context of the adjustments that are due anyway after the abolition of the imputed rental value (Eigenmietwert) from 2029, could flow into a later FINMA guideline. The discussion about more cautious valuations is also nothing new and has been conducted internally in the supervisory authority for years.

What Homeowners Can Do Now

There is no concrete pressure to act. Anyone financing or renewing a mortgage should not orient their own affordability at the minimum anyway. A buffer that also holds up under stricter amortization requirements and moderate interest fluctuations is the best preparation for any regulatory debate. Anyone running an amortization via Pillar 3a should keep in mind that the tax effect must be reassessed with the abolition of the imputed rental value from 2029. This restructuring will reshuffle the cards for many homeowners, regardless of which ideas from the Sovereign Money environment are picked up in the future.

Sources: Finews article on MoMo and mortgage market