There are essentially 2 requirements:
On affordability, I have deliberately avoided the word "stress", which is often used in this context. What it means is that the mortgage has to remain affordable even at an imputed interest rate of around 5%. The housing costs calculated on that basis may as a rule not exceed roughly one third of income (the "stress scenario").
The scenario is not necessarily as stressful as the term suggests at first glance, as long as the income holds up. If the rate rises sharply once a ten-year fixed-rate mortgage expires, it usually meets a nominal income that has grown in the meantime. With annual wage growth of 1-2%, that income is around 10-20% higher after ten years.
At the same time, the mortgage is required to be amortized down to two thirds of the lending value (which in practice usually corresponds to the purchase price) within 15 years. Put crudely, this only becomes relevant at all if you bring little more than the required minimum of equity to the purchase.
One could almost get the impression that the system is designed to keep the debt in place for as long as possible, but on comparatively favorable terms. As set out below under the macroeconomic view, this is how "good money" is made available.
Even if this combination of mortgage characteristics may look less than advantageous at a personal level, some benefits do emerge from an economic perspective. Money (a credit balance) is somebody's debt; strong money also means "solid debt". Who can take on debt? Essentially the state, companies, or private households. Each option has its advantages and disadvantages, but households are particularly attractive as debtors.
Among households, mortgage debt is especially attractive as a basis for "good money": it is backed by comparatively solid collateral (the family home),
and in Switzerland the debtor is in principle liable with their entire assets. With certain mortgages in parts of the USA, by contrast, liability is limited to the property ("jingle mail").
Risks remain nonetheless: if large parts of the population have trouble servicing their mortgage debt, the state may be forced to step in.
Because in a real crisis too many properties reach the market at once: prices fall, the collateral loses value, liquidity gets scarcer and bank balance sheets deteriorate.
Now let us look at the risks that come with a mortgage when buying a house. What can go wrong? It can be summarized as follows:
Let us look at them more closely.
It can feel as though the value of the house does not matter much as long as you go on living in it anyway. From an economic point of view, however, it very much does.
If property values fall by 10% the day after the purchase, you have effectively lost 10% of the purchase price, even if you do not feel it immediately.
A property can lose value on its own, for example because a new highway is built on the doorstep or the neighborhood deteriorates.
But it can also lose appeal as an asset class as a whole:
if, say, immigration and with it demand declines, or new taxes are introduced that weigh on property, property prices can come under stress.
The debtor is often a couple. In the event of a divorce, the property may have to be sold at an unfavorable moment. Alternatively, one of the two has to take on the financing alone, and keep meeting the bank's requirements while doing so. Income can fall as well, through job loss, outsourcing or health problems. Some of these risks are cushioned, at least temporarily. Unemployment insurance, for instance, can help keep servicing the mortgage for a certain time.
With a fixed-rate mortgage the interest rate is fixed for a set term, often around ten years. After that, the remaining debt has to be refinanced at the market conditions prevailing then.
The remaining debt may well stay at a similar nominal level. Its real value, however, declines over time through inflation.
A property often accounts for a very large share of total wealth: measured against net worth, sometimes well over 100%. An apartment worth CHF 1.5 million with a mortgage of CHF 1 million is a simple example.
You are thereby giving up part of the diversification that does have a certain value in principle. On top of that comes the low liquidity: if you want to free up capital from the property, that can take months or, in an unfavorable case, even years. With liquid securities, by contrast, a sale is often possible within seconds.
At first glance the Swiss mortgage looks fairly simple: some equity, an affordability calculation, an ongoing amortization. Once set up, it just runs. Behind it, however, lies not only a private financial decision but a system with political, social and economic dimensions, and a few less obvious characteristics.
Some risks are not where you first suspect them. A rising interest rate is only one part of it. The value of the property, the stability of the income, the low liquidity and the concentration risk matter just as much.
That is precisely why it is worth looking at a mortgage not just as a loan for a house, but as a (poorly diversified and illiquid!) part of your own balance sheet. So it is not only about mortgages, but about personal finance in Switzerland as a whole.