Mortgage reference interest rate narrowly misses reduction
Published: Monday, Dec 2nd 2024, 10:20
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Nothing is changing for tenants in Switzerland for the time being. The reference interest rate for residential rents remains at the current level.
The Federal Housing Office (BWO) is leaving the mortgage reference interest rate at 1.75 percent, as it wrote in a press release on Monday. But it was a hair's breadth.
To determine the reference interest rate, the BWO relies on the quarterly average interest rate of Swiss banks' domestic mortgage loans. According to the BWO, this has fallen to 1.63%, compared to 1.67% in the previous quarter.
For a reduction, the average interest rate would have had to fall to 1.625%. The reference interest rate is rounded up or down to the nearest quarter of a percent. Experts had not been able to decide in advance whether the reference interest rate would fall as early as December.
It will work in March
But experts are certain that March will see a lower reference interest rate and therefore falling rents. This is because the Swiss National Bank (SNB) has recently lowered key interest rates three times in a row, most recently in September. This has also made money market and fixed-rate mortgages cheaper again.
This is good news for tenants. This is because if the reference interest rate is reduced by 0.25 percentage points, landlords must reduce the rent by 2.9 percent - provided they have also implemented the previous increases. However, they are allowed to offset 40 percent of the accumulated inflation and "general cost increases".
However, tenants cannot expect the landlord to charge less rent of their own accord if the reference interest rate falls. If he does not do this, a rent reduction must be applied for - otherwise the rent will remain the same.
Last year, the reference interest rate climbed in two steps from 1.25% to 1.75% and has remained at this level ever since. Some landlords took the increases as an opportunity to raise rents significantly - in some cases by more than 10 percent.
No immediate further reduction
After that, however, nothing is likely to happen for a long time. This is despite the fact that many economists expect the SNB to cut key interest rates further next week. The reason: the average interest rate on which the mortgage reference rate is based reacts only slowly to changes in market interest rates.
This is because quite a few of the fixed-rate mortgages used for the calculation were concluded during the negative interest rate phase. And they were normally extended at a higher interest rate. This will prevent the average interest rate from falling more sharply.
The mortgage reference interest rate will next be published on March 3, 2025.
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