Reference interest rate likely to remain stable for the time being
Published: Monday, Feb 26th 2024, 11:10
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Tenants in Switzerland can breathe a sigh of relief. In all probability, there will be no further increase in the mortgage reference interest rate in March. They will therefore be spared another rent shock for the time being.
Last year, the reference interest rate rose in two steps from 1.25 to 1.75 percent. Some landlords took this as an opportunity to increase rents significantly - in some cases by over 10 percent.
The next quarterly publication of the reference interest rate by the Federal Housing Office (BWO) is due next Friday. Economists surveyed by the news agency AWP unanimously expect no increase.
This is because mortgage interest rates, on which the reference interest rate is based, have recently eased. This was due to the fall in inflation rates and hopes that the SNB would soon cut interest rates.
Peak reached?
Raiffeisen Switzerland chief economist Fredy Hasenmaile does not even expect the reference interest rate to change in 2024. The underlying average interest rate for all outstanding mortgages, which currently stands at 1.69%, is too sluggish for this.
It is true that every new mortgage taken out is still fundamentally more expensive and this is pushing up the average interest rate. But the difference to the next threshold value (at 1.875%) is high. Only when this is exceeded will the next increase follow.
The Zürcher Kantonalbank (ZKB) has a similar view. "We assume that the rise in the reference interest rate will pause this year," says the bank.
The SNB is expected to lower the key interest rate slightly towards the end of the year. In the opinion of the Zurich State Bank, this would mean that Saron mortgages, which are based on the SNB key interest rate and now account for a significant proportion of the mortgage volume, would no longer become more expensive. These had been the main driver of the previous increases, as they react one-to-one to changes in the key interest rate.
Meanwhile, Claudio Saputelli from UBS believes it is very likely that the reference interest rate has peaked for the time being at 1.75%. The big bank expects the SNB to cut key interest rates three times this year, namely by 0.25 percentage points in June, September and December. This will dampen the average rise in interest rates for mortgages.
Or an increase in late 2024?
But there are also other voices. "An increase as early as March 1 is actually unlikely," says Thomas Stucki from St. Galler Kantonalbank. But there is a high probability that the reference interest rate will rise again by 0.25 percentage points over the course of the year. This is because new fixed-rate mortgages are still being taken out at a significantly higher interest rate than expiring mortgages.
The situation with money market mortgages will not ease until the SNB lowers its key interest rate. And Stucki is convinced that this will be a long time coming.
Long-term forecasts widely divergent
Forecasts for 2025 and beyond diverge even further. According to ZKB, for example, the rise in the reference interest rate could continue slowly in 2025. This slow rise is being caused by the steady expiry of fixed-rate mortgages. They were often concluded at favorable conditions and are now being refinanced at higher interest rates. "This is gradually increasing the average interest rate on which the reference interest rate is based," says ZKB.
According to UBS expert Saputelli, however, tenants will not have to prepare for rent increases in the coming year either.
Others, however, even see a reduction in the reference interest rate looming on the horizon. Raiffeisen expert Hasenmaile, for example, assumes that the next change in the reference interest rate will be a reduction. "But not until the beginning of 2026," he emphasizes.
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