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Do you have questions about mortgage interest rates? We can help. Here you’ll find everything you need to know about this topic.
Historically speaking, we are currently in a relatively high interest rate environment with a key interest rate of 1.25 percent, following a period shaped by falling and sometimes even negative key interest rates from 2008 to 2022.
The trend reversal towards higher interest rates began in 2022 when inflation rose as a result of the coronavirus pandemic and the Russian attack on Ukraine. In order to curb inflation, the Swiss National Bank (SNB) raised the key interest rate five times until it reached 1.75 percent in June 2023. As a result, inflation fell to between 0 and 2 percent, which corresponds to the price stability range defined by the SNB. This enabled the SNB to lower the key interest rate twice by 0.25 percentage points each time in March and June 2024, bringing it down to 1.25 percent.
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.
Status as per 28 August 2024
Yields on 10-year Swiss government bonds fell considerably over the summer and stood at around 0.4 percent in mid-August. This decline was associated with a significant drop in mortgage interest rates.
The slide in interest rates is due on the one hand to the fall in inflation and the renewed fears of recession in the USA following a surprisingly sharp rise in unemployment in the summer. On the other hand, there is a risk that the anticipated recovery will fail to materialize in Europe in the coming quarters. These concerns have also left their mark on the Swiss capital market. In mid-August, interest rate futures suggested that the market was expecting the SNB to make up to three more interest rate cuts of 0.25 percentage points each over the next 12 months.
Although the economic risks have increased, a US recession or the absence of a European recovery is not our base scenario, and we expect the SNB to lower its key interest rate by 0.25 percentage points to 1.00 percent for the last time in September and to keep the key interest rate stable at this level in the coming quarters.
Yields on Swiss government bonds should then move slightly upwards again over the next few quarters. The same applies to longer-term mortgage interest rates. Mortgage interest rates linked to SARON are, however, likely to benefit from the SNB rate cut.
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:
Rates | Rates | 26.08.24 | 26.08.24 | 31.12.24 | 31.12.24 | 30.06.25 | 30.06.25 | 31.12.25 | 31.12.25 | 30.06.26 | 30.06.26 |
---|---|---|---|---|---|---|---|---|---|---|---|
Rates | SARON | 26.08.24 | 1.21 | 31.12.24 | 1.00 | 30.06.25 | 1.00 | 31.12.25 | 1.00 | 30.06.26 | 1.03 |
Rates | Swap 3 years | 26.08.24 | 0.64 | 31.12.24 | 0.88 | 30.06.25 | 0.80 | 31.12.25 | 0.83 | 30.06.26 | 0.91 |
Rates | Swap 5 years | 26.08.24 | 0.64 | 31.12.24 | 0.90 | 30.06.25 | 0.85 | 31.12.25 | 0.87 | 30.06.26 | 0.97 |
Rates | Swap 10 years | 26.08.24 | 0.74 | 31.12.24 | 0.99 | 30.06.25 | 0.98 | 31.12.25 | 1.01 | 30.06.26 | 1.12 |
What’s next for mortgage interest rates?
Our interest rate forecast gives you information each month on current interest rates and interest rate trends – free of charge by email.
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.
We currently have a lower annual inflation rate of between 1.0 and 1.5 percent. Accordingly, our forecasts still anticipate falling interest rates at the short end, but hardly any changes at the long end.
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.
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.
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 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.
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.
Make an appointment for a non-binding consultation or call us directly if you have questions.