Fritz Zurbrügg, vice president of the Swiss National Bank, last week warned that his country's housing market is on a dangerous course for correction as home prices in the continue to rise while affordability becomes stretched.
"Markets today are more vulnerable to corrections in the form of declining prices and increasing numbers of mortgage loan defaults. It is important to continue to closely monitor developments," Zurbrügg said in a speech on Tuesday, according to Bloomberg.
Zurbrügg warned that the rise in prices prompts "vigilance," and if officials don't take action, mortgages could be impossible to afford.
According to a housing index by UBS Group AG, the market is close to a "bubble."
Zurbrügg also warned that the boom in housing prices during the coronavirus pandemic in countries like the United States and Switzerland could worsen the bubble and encourage risky behavior due to the low interest rates.
Zurbrügg states there are "clear signs of unsustainable mortgage lending on the one hand and heightened risks of a price correction on the other...The probable continuation of the current upswing on the mortgage and real estate markets means that risks to financial stability are likely to remain in the spotlight."
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