5% is more or less the long term average mortgage rate.

Owners generally keep a mortgage on their property (~65% of the property value) to off-set wealth and property taxes. Residences are taxed by their estimated rental values, which is treated as income. Interest payments are tax deductible, while the principal on the mortgage lowers the amount owned for wealth taxes.

The other issue is that most primary mortgages don't allow for early repayment, meaning that the principal either has to be payed off in full or refinanced once the payment period is over. Owners become conditioned to continuously roll over the principal on their primary mortgage.

To answer your question, because the expectation is that residential property will be mortgaged through out the entire ownership period, banks have to make sure that someone who can afford the payment on a 1% mortgage can also afford the payment on a mortgage refinance if and when rates eventually go up.

Canada does something similar. To avoid buyers “biting off more than they can chew” with an ultra-low variable rate mortgage (where the rate might double or triple in 5 years), buyers have to qualify for a LIBOR+5% (I don’t remember the exact formula) mortgage as well.

Fixed interest mortgages in Switzerland are usually only up to 10 years. The 5% underwriting limit is used to minimize the interest risk.