In Switzerland, a mortgage is collateralized with the land on which the home is situated, making the land owner eligible for credit. The lender gets the rights to the land if the borrower does not repay the mortgage.
All Swiss citizens, including savers and tenants, are associated with the mortgage business. Because of this, mortgage rates are not the same for different categories of mortgages, and the mortgage business is politicized.
Despite the good banking structure in Switzerland, the mortgage market has not matured. According to experts, there are several reasons:
- Switzerland has the world's highest per capita mortgage indebtedness.
- Mortgage interest rates in Switzerland have been constant for many years.
- Switzerland has the world's highest withholding tax rate.
The government has taken several initiatives to accelerate capital inflow, and banks have also reduced the rates. Mortgage rates have a big impact on the Swiss inflation rate.