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The mortgage reference interest rate influences whether rents will rise or fall. But how does it work exactly?
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The reference interest rate plays a major role in setting and adjusting net rents in Switzerland. It indicates the average mortgage interest rates and serves as the legal basis for calculating the amount by which landlords may adjust rent.
The mortgage reference interest rate is a standard benchmark applied throughout Switzerland. Since 2008, it has replaced the indicative rates that previously varied from canton to canton. The calculation of the mortgage reference interest rate is based on the average interest rate of all mortgages issued by Swiss banks.
If the reference interest rate changes, rents may be adjusted:
The reference interest rate applies to all leases in Switzerland and is published four times a year by the Federal Office for Housing (FOH).
The mortgage reference interest rate is based on the average of the interest rates on all outstanding mortgages, taking into account the amount of each individual mortgage. This means that large mortgages have a greater impact on the rate than small ones. The reference interest rate is therefore a composite rate that also includes many older mortgages, some of which have interest rates that differ significantly from the rates currently in effect for new loans.
The mortgage interest rate, on the other hand, is the rate at which new mortgages are currently being issued. It is a much more accurate reflection of the current interest rate environment and banks’ refinancing costs.
To put it simply:
Our monthly interest rate forecast tells you about current interest rates and how they are likely to change – free of charge by email.
The Swiss National Bank (SNB) collects mortgage data from Swiss banks to calculate the reference interest rate.
The volume-weighted average interest rate for all Swiss mortgages as of the end of the previous quarter is the determining factor for the calculation. This average interest rate is then rounded to the nearest quarter of a percentage point (0.25 percentage points) in accordance with standard commercial practices.
There is a delay before the reference interest rate reacts to changes in the interest rate environment because it is not based on new mortgages, but on all outstanding mortgages. Many of these are fixed-rate mortgages with terms of several years, whose interest rates remain unchanged for an extended period of time.
New mortgages therefore have only a gradual impact on the average interest rate. There is only a significant change when existing mortgages expire and are replaced by new ones.
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Four times a year, the Federal Office for Housing (FOH) asks the SNB to collect data from Swiss banks on their mortgage loans. Calculations are carried out quarterly on 31 March, 30 June, 30 September and 31 December. The FOH then publishes the resulting reference interest rate.
At the moment, the mortgage reference interest rate is 1.25%. This rate has been in force since 2 September, when the reference interest rate was last reduced by 0.25%, and is expected to remain unchanged beyond March 2026. This means that the current figure is once again at the historic low that applied from March 2020 to March 2023.
UBS considers it unlikely that the reference interest rate will fall further to 1.0% this year. For that to happen, the average interest rate would have to drop below 1.125% – a level that has never been reached, even during the period of negative interest rates from 2015 to 2022. In the medium term, the reference interest rate could rise again to 1.50% in the first half of 2027 if average interest rates increase slightly.
Reference interest rate in %, UBS forecast from March 2026
The reference interest rate directly influences whether rents rise, fall or remain the same. A change in this rate can therefore have immediate financial implications for both tenants and landlords.
Higher or lower rental income: If the reference interest rate rises, landlords can increase rents – a rise of 0.25 percentage points allows them to introduce a rent increase of up to 3%, provided the interest rate remains below 5%. Conversely, if rates fall by 0.25 percentage points, tenants are entitled to a rent reduction of up to 2.91%.
Ways to mitigate lower rental income: When the reference interest rate falls, landlords can take targeted measures to counteract this trend. Possibilities include:
Landlords can take these factors into account when calculating a potential rent adjustment.
The mortgage reference interest rate is a key tool for determining rent in Switzerland.
Overall, the reference interest rate remains an important indicator that landlords should keep a close eye on.
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