UBS expects unchanged mortgage reference interest rate
Published: Monday, Aug 26th 2024, 12:20
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Tenants in Switzerland will not see any rent increases or reductions in the coming weeks. This is because the mortgage reference interest rate is likely to remain at its current level of 1.75% in September.
At least that is the forecast of the experts at UBS. According to an assessment published by the bank on Monday, the average interest rate for mortgages in Switzerland, which is calculated quarterly by the Federal Office for Housing (BWO), is likely to have fallen slightly for the first time in two years. However, this is not enough to adjust the reference interest rate, which is rounded up or down to the nearest quarter of a percent. The reference interest rate will be published next Monday.
Even in the medium term, the experts at the big bank see little scope for rent cuts based on the reference interest rate. The UBS economists assume that the Swiss National Bank will cut key interest rates again at the end of September. However, this is likely to be the last key interest rate cut and the reference interest rate for rents is therefore likely to remain at 1.75 percent for the next two years.
For one thing, the average interest rate on which the mortgage reference rate is based reacts sluggishly to changes in market interest rates. In addition, the SNB is expected to leave the key interest rate at 1.0% for the time being after the interest rate hike expected in September 2024 and the long-term interest rates, which have recently fallen, will subsequently rise again slightly.
However, further increases in the reference interest rate are off the table thanks to the latest key interest rate cuts and developments on the capital markets.
In principle, landlords may reduce or increase the rent by around 3.0 percent if the reference interest rate changes by 0.25 percentage points. They are also allowed to pass on 40 percent of the accumulated inflation and "general cost increases".
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