1. You Got a Mortgage From Who?
The most dangerous side effect of the central bank's regime of negative interest rates – or charges on Swiss franc deposits – is that bonds don't yield anything either, or in Switzerland's case, banks actually pay borrowers for the privilege of loaning them money, instead of the other way around. This has hit bond-heavy insurers and pension funds, leading them to look for new sources of yield. These firms eventually emerged as new players on the mortgage market, where they can undercut banks on price thanks to a cushier regulatory regime.
This had led to a skew in Switzerland's already-overheated housing market, as well as unseemly finger-pointing and dramatics (in German) among bankers – and kept feeding the Swiss housing bubble.
2. Price Jumps – Miraculous, But Not Sustainable
Flouting expectations, mortgage rates actually rose instead of falling in line with negative interest rates. Swiss retails banks almost unanimously lifted their lending rates right after the SNB's dismissal of the cap, particularly on long-dated mortgages. This led to a fattening of interest margins, as well as an extra revenue boost despite the burden of the Swiss franc charges.
Those times are over: increasing competition has led to a price war (see point 1). Meanwhile, fixed-rate mortgages from the «prehistoric» age before negative interest rates are coming to the end of their term. Because they are being replaced by less lucrative instruments, bankers are feeling the franc surcharge hit right in the pocketbook.
