Reference interest rate likely to remain stable again according to UBS
Published: Thursday, May 23rd 2024, 10:50
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Tenants in Switzerland can probably breathe a sigh of relief. In all likelihood, the mortgage reference interest rate will not be increased in June. According to a study by UBS, they will therefore be spared a further rent shock.
In 2023, the mortgage reference interest rate rose in two steps from 1.25 percent to 1.75 percent, which prompted some landlords to increase rents significantly - in some cases by more than 10 percent. In March 2024, however, the Federal Office for Housing (FHO) left the reference interest rate unchanged at the increased level.
And that is what it now looks like again, as UBS writes in a study published on Thursday. The BWO is likely to announce the mortgage reference interest rate unchanged at 1.75 percent on June 3, write the economists at the major bank. The underlying average interest rate is likely to have remained stable despite the SNB's key interest rate cut in March.
Experts also expect the reference interest rate to remain at the current level of 1.75 percent for the year as a whole. This is despite the fact that UBS itself expects two further interest rate cuts in June and September.
Basis for reference interest rate
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 rose from 1.69% to 1.72% in March compared to the previous quarter.
If the reference interest rate rises by 0.25 percentage points, landlords may increase rents by 3.0 percent - provided they have passed on previous reductions. In addition, they may pass on 40 percent of the accumulated inflation and "general cost increases".
Specifically, a claim for an increase based on the reference interest rate only exists if the current rent is based on an earlier, lower reference interest rate. As a reminder: when it was introduced in 2008, the reference interest rate was 3.5 percent.
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