Mortgage interest rates: interest rate forecast and trend

Do you have questions about mortgage interest rates? We can help. Here you’ll find everything you need to know about this topic.

The current interest rate environment

Following a period of rate hikes, the interest rate situation is currently more stable. From a long-term perspective, we are in an environment characterized by high interest rates.

In 2022, inflation rose sharply, peaking at 3.5 percent. As a result, the Swiss National Bank (SNB) raised its key interest rate five times in a row to 1.75 percent. As a result, inflation has fallen significantly in recent months and is now below the two-percent mark, in line with the price stability range defined by the SNB.

The SNB therefore refrained from raising the key interest rate again in December 2023. If the SNB’s forecast is confirmed and inflation remains within the target range in the coming months, the first interest rate cuts are expected in the course of 2024.

The key interest rate is the interest rate through which central banks influence the behavior of commercial banks. After all, banks also have to keep borrowing money. The level of the key interest rate therefore has a significant impact on the level of mortgage interest rates.

Interest rate forecast: the first SNB interest rate cut of 2024 is approaching

Status as per 21.02.2024

Yields on Swiss government bonds and mortgage interest rates fell significantly until the end of December 2023, moved slightly upward again in the first half of January, and have since moved sideways.

The next important indicator for the markets will be the Swiss National Bank’s (SNB) monetary policy assessment on 21 March. We assume that the SNB will decide against reducing interest rates in March and will wait until the second quarter to make its first key interest rate cut, at the same time as the European Central Bank and the US Federal Reserve. Overall, we are anticipating three interest rate cuts in Switzerland this year. This should reduce the key interest rate from 1.75 percent to 1 percent.

In January, Swiss inflation was much lower than expected. This means that there may be an interest rate cut in March if inflation remains unexpectedly low in February and the Swiss franc shows signs of strengthening.

The capital market has already prepared itself for a series of interest rate cuts in 2024, which is why we will only see a slight decline in the longer-term yields of Swiss government bonds or in longer-term mortgage rates in the coming quarters. Mortgage interest rates linked to SARON, on the other hand, are likely to benefit significantly from the SNB’s interest rate cuts in the next few quarters, as the SARON interest rate is closely linked to the SNB’s key interest rate.

Portrait of Claudio Saputelli

Claudio Saputelli

Chief Investment Officer Global Real Estate

Interest rates on ten-year federal bonds should settle at 0.7 percent in the course of 2024. This means that long-term mortgages are likely to become slightly cheaper over the course of the year.

Long-term interest rates in percent

Interest rates fluctuate repeatedly over the course of time. This can be due to a variety of factors. The last trend reversal occurred in 2022 and was marked by the following events:

  • In response to strong inflation following the pandemic and Russia’s war in Ukraine, the SNB – like other central banks – began raising its key interest rate in 2022. As a result, yields rose sharply.
  • To curb higher levels of inflation, the SNB continued to raise key interest rates in 2023 while yields remained high. Towards the end of 2023, inflation eased significantly, causing yields to fall sharply in anticipation of future rate cuts.
  • Today’s yields already reflect (anticipated) rate cuts in 2024. Therefore, the potential for a further fall in the current year is very limited. If inflation or growth turn out to be stronger than expected, yields could even rise again.

Interest rate forecast in figures

Rates

Rates

21.02.24

21.02.24

30.06.24

30.06.24

31.12.24

31.12.24

30.06.25

30.06.25

31.12.25

31.12.25

Rates

SARON

21.02.24

1.69

30.06.24

1.50

31.12.24

1.00

30.06.25

1.01

31.12.25

1.03

Rates

Swap 3 years

21.02.24

1.12

30.06.24

1.02

31.12.24

0.87

30.06.25

0.83

31.12.25

0.93

Rates

Swap 5 years

21.02.24

1.13

30.06.24

1.04

31.12.24

0.94

30.06.25

0.93

31.12.25

1.03

Rates

Swap 10 years

21.02.24

1.27

30.06.24

1.12

31.12.24

1.06

30.06.25

1.08

31.12.25

1.20

Interest rate forecast

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How the mortgage interest rate affects your mortgage

The mortgage interest rate is one of the key factors when deciding on a mortgage. It affects the monthly payments as well as the total cost of your loan.

Inflation peaked at over 3 percent in 2022. Interest rates also rose, resulting in higher mortgage rates. As a rule, the lower the interest rate, the cheaper the mortgage.

However, the annual inflation rate is now lower at between 1.6 and 1.7 percent. Accordingly, forecasts anticipate a fall in interest rates.

These economic factors affect mortgage interest rates

Mortgage interest rates in Switzerland depend on a variety of factors. We provide you with an overview.

Despite basic knowledge of these factors, it is advisable to rely on well-founded analyses by financial institutions.

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How interest rates affect your mortgage model

When choosing the right mortgage strategy, there are numerous factors to consider.

The most important aspects include:

The current interest rate situation determines the starting position and the amount of mortgage interest when you take out a fixed-rate mortgage. With a SARON mortgage, on the other hand, you finance your home with a market-oriented interest rate that varies as interest rates change.

Interest rate forecasts help when creating scenarios showing how high your future payments will be. The table below provides an initial idea of which type of mortgage could be suitable for you at current interest rates.

Interest rate level

Interest rate level

Fixed-Rate Mortgage short

Fixed-Rate Mortgage short

Fixed-Rate Mortgage medium

Fixed-Rate Mortgage medium

Fixed-Rate Mortgage long

Fixed-Rate Mortgage long

SARON Mortgages

SARON Mortgages

Interest rate level

High

High

Fixed-Rate Mortgage short

suitable under certain conditions

Fixed-Rate Mortgage medium

not suitable

Fixed-Rate Mortgage long

not suitable

SARON Mortgages

suitable

Interest rate level

Decreasing

Decreasing

Fixed-Rate Mortgage short

suitable under certain conditions

Fixed-Rate Mortgage medium

not suitable

Fixed-Rate Mortgage long

not suitable

SARON Mortgages

suitable

Interest rate level

Normal

Normal

Fixed-Rate Mortgage short

suitable

Fixed-Rate Mortgage medium

suitable

Fixed-Rate Mortgage long

suitable

SARON Mortgages

suitable

Interest rate level

Rising

Rising

Fixed-Rate Mortgage short

suitable under certain conditions

Fixed-Rate Mortgage medium

suitable

Fixed-Rate Mortgage long

suitable

SARON Mortgages

suitable under certain conditions

Interest rate level

Low

Low

Fixed-Rate Mortgage short

suitable under certain conditions

Fixed-Rate Mortgage medium

suitable

Fixed-Rate Mortgage long

suitable

SARON Mortgages

suitable

Your personal mortgage profile describes your risk capacity and your risk tolerance. If, for example, you attach great importance to security and a fixed budget, your mortgage profile will be completely different from that of a person who actively follows interest rate developments and has financial reserves. You will probably sleep better with a fixed-rate mortgage because you will know exactly how much interest you will pay for a specific period of time.

Individual influences for borrowers

Factors such as the type of loan and the term of a mortgage can be chosen individually. This will of course affect the amount of mortgage interest, depending on the size and type of mortgage. This also depends heavily on the creditworthiness of the mortgage borrower and the value and location of the property.

The better you understand your own financial possibilities, the higher your chances of getting the best-possible mortgage interest rate.
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The creditworthiness is based on the financial situation of the potential borrower. Before buying a house, the question arises as to how much equity you can contribute – as a rule, at least 20 percent of the property value is required.

The ratio between equity and mortgage is called loan-to-value. If you contribute more equity, this can have a positive impact on the interest rate. The better you understand your own financial possibilities, the higher your chances of getting the best-possible mortgage interest rate.

Tips for mortgage borrowers

We now know that mortgage interest rates are influenced by various factors. The question arises as to how best to keep an eye on developments in order to react in time. Here are some tips.

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