The average cost of Swiss fixed-rate mortgages (FRMs) is currently 1.74 percent per annum for 10-year FRMs, 1.58 percent for five-year FRMs, and 1.52 percent for two-year FRMs. For perspective: Two years ago, when 10-year FRMs reached a preliminary high, the average interest rate was 3.35 percent per annum (refer to the Swiss Mortgage Index graph). “That means the interest rates of fixed-rate mortgages have been nearly halved over the past two years,” remarks moneyland.ch expert Felix Oeschger.
SARON mortgages are still more expensive than FRMs
The moneyland.ch mortgage index shows that the average annual interest rate for SARON mortgages is currently 1.90 percent per annum. That means SARON mortgages are more expensive than fixed-rate mortgages, on average. But if the Swiss National Bank (SNB) continues to tighten its fiscal policy, SARON mortgages will likely return to being cheaper than FRMs over the coming quarters. “Expected reductions to the SNB’s key interest rate are currently already priced into fixed-mortgage interest rates. That is not the case for SARON mortgage interest rates, as they only reflect actual changes to the SNB’s key interest rate, without pricing in expectations,” explains Felix Oeschger.
Outlook
Most market participants and economists believe that the SNB will reduce its key interest rate by 0.25 percentage points in December, and again by 0.25 percentage points at its meeting in March. If these expected changes do occur and the SNB’s key interest rate is reduced from its current one percent down to 0.5 percent, then the most likely scenario is that the interest rates of FRMs will move sideways.
However, there are currently major economic and geopolitical uncertainties – including those related to the elections in the US. These could result in either a further lowering of mortgage interest rates of a new round of rate increases.
The moneyland.ch Swiss Mortgage Index
The moneyland.ch Swiss Mortgage Index is based on the reference mortgage interest rates that lenders publish online. These are automatically recorded by moneyland.ch twice a day. The index for 10-year FRMs shows the daily average of interest rates from more than 30 Swiss banks and insurance companies. Additionally, the index also tracks the interest rates of FRMs with other mortgage terms, as well as adjustable-rate mortgages (ARMs), construction loans, and SARON mortgages. In addition to the reference rates for each mortgage offer, moneyland.ch also calculates various key figures like the median, arithmetic average, mode, minimum, and maximum interest rates for different product groups like online mortgages, mortgage offers from banks, and mortgage offers from insurance companies.
More on this topic:
Compare current Swiss mortgage reference rates
Graph: Swiss Mortgage Index (German PDF)
Table: Overview of mortgage interest rates (German PDF)
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