Interest rates for fixed-rate mortgages are falling in Switzerland
Published: Tuesday, Dec 10th 2024, 01:50
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Conditions for fixed-rate mortgages in Switzerland have improved significantly over the course of the year. With the interest rate reduction cycle initiated by the Swiss National Bank (SNB) in March, interest rates for fixed-rate mortgages also fell.
The published reference interest rates for ten-year fixed-rate mortgages stood at 1.55% as of December 6, 0.71 percentage points lower than at the beginning of the year, as the comparison portal Comparis writes in its interest rate forecast published on Tuesday. At the end of September, the benchmark rate was 1.81 percent.
The benchmark rates calculated by Comparis are published but still negotiable average interest rates from around 30 mortgage institutions.
According to Comparis, the refinancing costs of banks, known as swaps, have fallen even more sharply than mortgage interest rates. The ten-year swap has fallen by 0.83 percentage points to 0.33% since the beginning of the year. Meanwhile, the yield on 10-year Confederation bonds, the SNB spot rate, fell by 0.44 points to 0.24%.
Further SNB cuts priced in
Not only the interest rates for ten-year securities, but also those for other maturities have fallen steadily over the last six months, Comparis also noted. Inflation in Switzerland has fallen faster than expected, while the SNB has lowered the key interest rate in three steps since March, each time from 25 basis points to 1 percent.
"The sharp fall in benchmark interest rates for fixed-rate mortgages indicates that the SNB is continuing its cycle of interest rate cuts. The current prices already include at least two further interest rate cuts," says Comparis financial expert Dirk Renkert with conviction. The next SNB decision is on the agenda next Thursday (12.12.).
Meanwhile, the Comparis experts expect benchmark interest rates for ten-year fixed-rate mortgages to range between 1.45 and 1.65 percent by the end of June 2025. Those for five-year mortgages are expected to be between 1.30 and 1.45 percent, compared to the current benchmark rate of 1.40 percent.
Pressure on mortgage reference rate is high
In view of the recent sharp fall in mortgage interest rates, the mortgage reference rate for residential rents is also likely to fall in the coming year, the press release continued. At the beginning of December, the Federal Office for Housing (FHO) left this rate unchanged once again after raising it by two steps from 1.25 percent to 1.75 percent in 2023.
"The sometimes significant increases in existing rents resulting from the two increases in the reference interest rate have only had a very modest impact on inflation," says Renkert. If tenants' claims are asserted following a reduction in the reference rate, only minor inflationary effects are therefore to be expected.
On the other hand, new tenants are confronted with persistently rising asking rents due to the shortage of living space. "Overall rising rents are and will remain a significant driver of inflation in the future," the Comparis expert is convinced.
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