by Roberta Murphy

Would you believe that Swiss homeowners are sitting on a “mountain of debt” and that the Swiss National Bank claims that mortgage credit now represents 103.6 percent of Switzerland’s Gross Domestic Product or GDP?

The Swiss are only outdone by the Netherlands  with 107.1,  according to SwissInfo, who also report that other heavy debtors include the United States at 76.5 percent and Spain at 64.

The article goes on to state that the difference (perhaps) between the United States and Switzerland is that the Swiss mortgage debt represents, on average, only half the cumulative property values. Switzerland may have a housing bubble of sorts, but values would have to fall by 50% for the mortgage debt to become toxic.

Mortgage rates are currently very low in Switzerland, at around 2 to 2.5 percent for a 10 year mortgage term. Even more unusual is the fact that the principal balance of the loan does not have to be re-paid for a long period of time. For example, banks only demand that a third of the debt be paid down within 20 years–or at retirement age.

The Swiss income tax situation also complicates things, because homeowners must pay taxes on the “assumed rent” they would be paying for their home were they renting it. At the same time, they are allowed to deduct mortgage interest and other expenses entailed in maintaining the home. This creates some serious tax advantages  for home ownership.

These tax advantages, on one hand, encourage Swiss homeowners to hold onto mortgage debt because of its deductability. On the other hand, if government were to remove that tax advantage, Swiss would be more likely to pay down their mortgage debt.

This is a synopsis of a much more detailed article here.

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