Between June and December of 2023, the interest rates of fixed-rate mortgages (FRMs) headed in one direction only: down. Within half a year, the average annual interest rate of two-year FRMs fell from 3.07 percent (June 19, 2023) to 2.18 percent (December 18, 2023). The average rate of five-year FRMs fell from 3.02 percent to 2.09 percent, and that of ten-year FRMs slid from 3.04 percent to 2.21 percent. In other words, fixed-rate mortgages became around 30 percent cheaper over the second half of 2023.
Mortgage interest rates today
After flattening out in December 2023, the interest rates of fixed-rate mortgages have climbed again since the start of 2024, and currently sit at an average of 2.25 percent for two-year FRMs, 2.21 percent for five-year FRMs, and 2.34 percent for ten-year FRMs (refer to the interest rate table available at the foot of this report).
Will SARON mortgages become cheaper than FRMs again?
Even with the rate hike, FRMs are currently still cheaper than SARON mortgages, which have an average annual interest rate of 2.61 percent, according to the moneyland.ch mortgage index. This continuing situation is extraordinary because historically, FRMs have usually been more expensive than money market mortgages (SARON mortgages since 2021, when they replaced LIBOR mortgages).
If the situation develops in the way that most market observers expect it to, the SARON will go down between now and the end of 2024. If that happens, SARON mortgages could soon be cheaper than fixed-rate mortgages again.
Outlook
Inflation in Switzerland, as well as in other European countries and the US, seems to be under control at the present time. The market’s expectation is that central banks will lower their key interest rates several times over the course of this year.
Currently, the most widespread opinion among Swiss economists is that in 2024, the Swiss National Bank (SNB) will lower its interest rate twice by 0.25 percentage points per change. If that happens, the key interest rate would sit at 1.25 percent at the end of the year. The likelihood that the SNB will lower its key interest rate is already factored into the current interest rates of FRMs.
But if the economy develops more poorly than expected, the SNB could end up making much larger cuts to its key interest rate. That scenario would favor continued reductions in mortgage interest rates. But it is also possible that inflation rates could climb again, forcing a tighter financial policy, which would push mortgage interest rates up. The major differences in the predictions being made by different economists reveal the present uncertainty about how interest rates and markets will develop,
“Because of the uncertainties, it is possible that we will see larger fluctuations in mortgage interest rates in the coming months,” says moneyland.ch analyst Felix Oeschger.
More on this topic:
Interest rate table (PDF)
Interest rate graph (PDF)
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About the moneyland.ch mortgage index
The moneyland.ch mortgage index is based on reference interest rates published online. These are automatically recorded twice a day by moneyland.ch. For ten-year fixed-rate mortgages, the index shows the daily average of interest rates from 30 Swiss banks and insurance companies. Additionally, moneyland.ch also indexes the reference interest rates of: fixed-rate mortgages with other mortgage terms; adjustable-rate mortgages; constructions loans; and SARON mortgages. In addition to tracking the reference mortgage interest rates per lender and mortgage offer, moneyland.ch also indexes the median, arithmetic average, and mode, as well as minimum and maximum rates in different product groups like online mortgages, mortgages from banks, and mortgages from insurance companies.
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