UPDATE 1-SNB’s Jordan: rates not tool to fight house bubble

* Jordan sees no country-wide house price bubble

* Sees risks of overheating in some regions, segments

* Says supervision, regulation way to tackle issue not rates

(adds details, background, retail sales data)

ZURICH, Nov 3 (BestGrowthStock) – The Swiss National Bank favours
additional supervisory measures to fight the risk of a house
price bubble forming as its interest rate policy focuses on
maintaining price stability, a Swiss central banker said on
Wednesday.

SNB vice-chairman Thomas Jordan repeated the central bank’s
recent assessment that current low interest rates could lead to
overheating in the real estate market, though there were no
signs of a country-wide bubble yet.
“The longer the main interest rate stays low due to the
current inflation forecast as well as developments in the
foreign exchange rate and the economy, the bigger the risk of a
bubble,” Jordan told daily newspaper Neue Zuercher Zeitung.

“In general, it would be wrong to think that you should use
the interest rate primarily to balance the real estate market,”
he added. “The use of traditional monetary policy instruments is
directed at maintaining overall price stability in our country.”

Earlier this year, many analysts had seen the SNB’s warnings
against the risks from soaring house prices as a sign that the
central bank was about to tighten monetary policy.

But at its meeting in September, the SNB indicated that it
was in no rush to raise its target for the 3-month Swiss franc
LIBOR from the current 0.25 percent as it expected a marked
slowdown of the Swiss economy due to the strong Swiss franc.

However, recent economic data have pointed to a rather
moderate slowdown from the current brisk rate of growth. Swiss
retail sales for example posted a healthy 3.8 percent
year-on-year rise in September.

The SNB vice-chairman said the situation on the real estate
market had not got more serious over the past couple of months
but warned against giving an all clear.

“We can certainly not speak of a country-wide real estate
bubble,” Jordan said. “However, there are clear signs of an
overvaluation in certain regions and market segments.”

“In addition there are elements that could quickly lead to
unwanted developments: a long phase with very low interest
rates, intense competition in the mortgage market and few
attractive investment alternatives for banks,” he said.

The central bank was therefore in talks with bank regulator
FINMA and the banks to increase macroprudential supervision to
get reliable information about the risks in the mortgage market,
he said.

The SNB’s first step was to sound clear warnings to banks in
order to make them aware of the risks, Jordan said.

Should this sort of “moral suasion” alone fail to contain
the risks, further regulatory measures could be introduced.

“You could for example adjust the capital requirements for
mortgage business depending on the cycle by temporarily calling
for higher capital requirements,” he said.

Other possible measures could be limits to the loan to value
ratio or rules on the assessment of a debtors ability to bear a
mortgage and the interest, he said.

(Reporting by Sven Egenter; Editing by Toby Chopra)

UPDATE 1-SNB’s Jordan: rates not tool to fight house bubble