UBS launches new mortgage product: UBS Libor mortgage
This new product will round out UBS's mortgage offering as from mid-May 2004. It is especially suitable for anyone looking for flexible financing.
The UBS Libor mortgage has a variable interest rate that is adjusted on a quarterly or half-yearly basis. Clients can choose either the three-month or the six-month CHF LIBOR as their reference rate. Unlike existing money-market mortgages, the UBS Libor mortgage is not a fixed-term product. It is available for amounts as low as CHF 100,000. A further special feature is the option to convert to a different UBS product (for instance a fixed-rate mortgage) at the end of every quarter or half-year free of charge.
The new UBS Libor mortgage is aimed at clients who want to benefit from attractive, market-driven interest rates. They must be prepared to accept short-term fluctuations in the rate of interest they pay and keep a close eye on how interest rates develop. At the same time, however, the new product can also be used as a flexible bridge loan for clients with mortgages that are due to be repaid in full or in part in the foreseeable future, for example if they plan to sell their home.
Being linked to short-term interest rates, the UBS Libor mortgage reacts rapidly to developments on the money market. One way clients can protect themselves against rising interest rates is by switching to a fixed-rate mortgage in good time. This is why the UBS Libor mortgage is offered without a rate cap. Since not all mortgages products are suited to all borrowers, UBS attaches a great deal of importance to individual advice. It aims to strike the best balance between its clients' personal wishes, their financial circumstances and the current interest-rate environment.
Current interest-rate environment
The Swiss economy is staging a recovery. Following an extended period in which most industries and companies experienced a marked consolidation, the upswing is expected to last a long time, too. Inflationary pressures are thus set to rise with a considerable lag during this cycle. As a result, UBS expects interest rates to increase less sharply than they have in previous recovery phases.
The growth outlook is already factored into the Swiss interest-rate curve to a considerable degree. Fixed-rate mortgages are thus showing a clear premium relative to LIBOR-linked products. In principle, however, a LIBOR mortgage represents a sensible complement to the fixed-rate option, which is safe, but generally works out a little more expensive. Finding the best mix at a given time depends on the prevailing market situation. Fixed-rate products should be taken into consideration more during an upswing, whereas increased use of LIBOR mortgages can pay off later in the cycle.
Zurich / Basel, 11 May 2004
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