Experts disagree on further development of the reference interest rate
Published: Monday, Sep 2nd 2024, 11:24
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The mortgage reference interest rate for residential rents remains unchanged for the time being. Experts disagree on the further development: it depends primarily on the SNB's monetary policy.
The phase of rent increases for existing tenancies is definitely over for the time being. 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.
This is hardly surprising at first: experts had not expected a change in the reference interest rate in advance.
The situation was completely different in 2023: At that time, the reference interest rate climbed 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 more than 10 percent.
Experts disagree on future development
To the delight of the tenant nation of Switzerland, however, things could soon go in the other direction again. The emphasis is on "could" - because the experts do not agree on how things will develop.
In principle, the BWO bases its calculation of the reference interest rate on the quarterly average interest rate of Swiss banks' domestic mortgage loans. According to the BWO, this fell to 1.67% in September compared to the previous quarter (1.72%).
The reference interest rate is rounded up or down to the nearest quarter of a percent. A reduction would take place at an average interest rate of 1.625 percent. At first glance, a reduction seems to be within reach.
However, a survey by the news agency AWP shows that economists are divided on this issue. Raiffeisen man Fredy Hasenmaile says on behalf of his guild that modeling the reference interest rate is not easy, "which is why there are different forecasts".
But this much is clear: the mortgage reference interest rate depends heavily on the monetary policy of the Swiss National Bank (SNB). According to Hasenmaile, if the SNB cuts its key interest rates in September, the reference interest rate could also fall below the threshold of 1.63%, "perhaps as early as December, but certainly in March 2025".
Thomas Stucki from St. Galler Kantonalbank, Arthur Jurus from Oddo BHF and Alex Rohner from J. Safra Sarasin share Hasenmaile's view. Like Hasenmaile, Rohner expects the reference interest rate to be lowered by 2025, while Jurus expects it to be lowered as early as December 2024.
SNB decisions as a key factor
Only Stucki is a little more cautious. In his opinion, the reference interest rate could fall in the second half of 2025 if the SNB actually lowers its key interest rate to 0.50 percent. With a key interest rate of 0.75 percent, which he expects next year, a reduction in the reference interest rate is possible, but not certain, he emphasized.
The economists at UBS, for example, have now departed from the previous analysis - also because of the SNB's monetary policy. The UBS economists assume that the SNB will lower the key interest rates again at the end of September. However, according to the big bank, this is likely to be the last key interest rate cut. And this will not be enough to drive down the reference interest rate for rents. It will remain at 1.75 percent for the next two years, they wrote.
Fixed-rate mortgages as a potential brake pad
In addition to the UBS analysis, Ursina Kubli emphasizes that a large part of the mortgage portfolio consists of fixed-rate mortgages. In contrast to Saron mortgages, their interest rates can only be changed at maturity and refinancing.
"The more expensive fixed-rate mortgages with short terms ensure that the average mortgage interest rate will probably not fall enough to trigger a reduction in the reference interest rate," she writes.
Whether Switzerland as a tenant country can look forward to falling rents is therefore completely open. Tenants will therefore be looking forward to December 2, 2024 with all the more anticipation. This is when the BWO will next announce the mortgage reference interest rate.
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