The prices being asked for new home rentals is climbing, but until now, existing rental contracts have largely remained unscathed. That will likely change in 2023. The reason is that we can expect to see a hike in the mortgage reference rate, which plays a role in determining rents in Switzerland. Once that happens, the majority of Swiss landlords will be allowed to raise their rents.
According to the newest Immo-Monitoring report from Wüest Partner, more than half of Swiss rental agreements (54 percent) are based on the current 1.25 percent reference rate. We can expect to see rents being raised across all of these contracts if the Swiss federal housing authority (BWO) raises the reference rate.
Rent increases most likely in Eastern Switzerland
Switzerland’s central and eastern regions and the Zurich area are particularly affected because over 60 percent of rental contracts in these regions are based on a 1.25 percent reference rate (table 1). According to the real estate specialist, the proportions are much smaller in western Switzerland – particularly the Lake Geneva area – and in the country’s southern regions. So German-speaking Switzerland will likely be much more strongly affected by rent increases than the Romandie.
Table 1: Portion of rental agreements with a 1.25 percent reference rate
| Region |
Portion of 1.25% rental contracts |
| Eastern Switzerland |
64% |
| Zurich region |
61.5% |
| Central Switzerland |
61.1% |
| Bern region |
53.9% |
| Northwestern Switzerland |
53.4% |
| Western Switzerland |
45.7% |
| Southern Switzerland |
44% |
| Lake Geneva region |
34.3% |
Fourth quarter, 2022. Source: Wüest Partner
It is not yet known for certain whether or not the mortgage reference rate will increase this year, but it is very likely. A change would depend on how high the weighted average interest rate for Swiss mortgages is. If that average surpasses 1.37 percent, then the mortgage reference rate will be raised to 1.5 percent or even higher.
The most recent sampling showed an average of 1.18 percent. “But that was at the end of September. Since then, the Swiss key interest rate has reached new highs,” observes moneyland.ch editor Raphael Knecht. It is very possible that the weighted average mortgage interest rate which the Swiss National Bank calculates on behalf of the BWO is already much higher than that.
The BWO announces changes to the mortgage reference rate on March 1, June 1, September 1, and December 1. Wüest Partner too expects that a rate hike will occur over the course of the year. The last change occurred in March, 2020, when the reference rate was lowered from 1.5 percent to 1.25 percent. So a rate increase would bring the interest turnaround which we have already seen in many other sectors to rents as well.
At least 3 percent more rent
If the interest rate were to climb by 0.25 percentage points, landlords will be able to charge 3 percent more rent. An increase of 0.5 percentage points would allow them to raise rents by 6 percent, and so on (table 2). Example: If your home rental agreement has a 1.25 percent reference rate and you pay 2000 francs of rent, your landlord could raise your rent to 2060 francs if the reference rate were to climb to 1.5 percent.
Table 2: Impact of reference rate hikes
| Reference rate |
Rent increase |
| 1.25% |
+0% |
| 1.50% |
+3% |
| 1.75% |
+6% |
| 2.00% |
+9% |
The BWO will announce any chances to the reference rate on the first days of March, June, September, and December of this year. So, the earliest point at which your rent could possibly go up would be on the first regular notice interval following March 1, 2023 – if an increase in the mortgage reference rate is announced. The most important questions on this topic are answered by moneyland.ch in the guide to the Swiss mortgage reference rate and rents.
More on this topic:
Is my landlord allowed to raise my rent?
How the mortgage reference rate works
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