The interest rates of Swiss federal bonds have been going up since the start of the year. The interest rates of fixed-rate mortgages (FRMs) with long terms have followed suit – although they remain relatively low.
Mortgages during the coronavirus crisis: History
At the dawn of March 2020 as the coronavirus crisis just began to emerge, the average mortgage interest rates were 0.94% for 5-year FRMs and 1.02% for 10-year FRMs. That is close to the historical low of August 2019. Swiss mortgage interest rates shot up over March 2020 before beginning a slow decent which lasted until November 2020. Interest rates levelled out at an overall low between mid-November 2020 and the end of January 2021.
Current mortgage situation
“Interest rates for fixed rate mortgages have been climbing again since the end of January 2021,” states moneyland.ch CEO Benjamin Manz. Currently, the Swiss mortgage index by moneyland.ch shows average interest rates of 0.96% for 5-year FRMs and 1.15% for 10-year FRMs (as per February 9, 2021). While rates have climbed since the beginning of February 2021, the current rates are still relatively low.
The interest curve has become more pronounced
The interest curve of Swiss FRMs is still relatively flat, but it has sharpened somewhat since the beginning of the year. At the beginning of 2021, the difference between the average interest rates for 2-year and 10-year FRMs was around 0.18 percentage points. It has since increased to 0.23 percentage points. In other words, the price markups for longer-term FRMs have become somewhat bigger again.
How will mortgage interest rates develop?
The coronavirus crisis has carried over into 2021. Uncertainty continues to apply to mortgage interest rates. A sharp rise in mortgage interest rates is unlikely in the current low-interest environment. “The development of an interest rate base line with slight upward and downward movements is more likely, believes moneyland.ch analyst Felix Oeschger.
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