Published21 August 2024, 08:00
Interest rates on the decline: What low mortgage rates mean for owners and tenants
Low interest rates could give the real estate market a boost. But tenants can also hope to benefit from this.
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When it comes to real estate, buying is currently cheaper than renting.
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The reference interest rate could fall even further in December.
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Tenants can also hope for a short-term reduction in rent.
Mortgage interest rates are currently on a downward trend and are at their lowest levels for a long time. What does this mean for homeowners and those who want to become homeowners? And will renters also benefit?
Mortgage interest rates are currently on the decline. Ten-year fixed-rate mortgages in particular are cheaper than they have been for a long time.
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Fredy Hasenmaile, chief economist at Raiffeisen, and Prof. Dr. Donato Scognamiglio from the real estate consultancy Iazi assess the current developments and answer the most important questions.
Impact on the mortgage market
Hasenmaile: After an absence of around two years, the cost advantage of owning a home has returned and “buying” is now cheaper than “renting”. As a result, we expect slightly higher price growth in the medium term.
Scognamiglio: For the approximately 80 percent of owners with fixed-rate mortgages, the current figures have no impact for the time being. They must hope that the situation will be similar when their mortgages are renewed. For owners of Saron mortgages, however, the low interest rates mean financial relief.
Tenants have to wait, but can hope
Hasenmaile: Due to the key interest rate cuts that have been made and are still to be expected, the reference interest rate is likely to fall from 1.75 percent to 1.5 percent in December. This step is due by March 2025 at the latest. For many existing tenants, this means that they can demand a reduction in rent. However, the interest rate cuts have practically no impact on new rents.
There are also two categories of tenants. New tenants will not be able to benefit from the interest rates. Existing tenants, on the other hand, can hope for a slight reduction in rent.
20min/Ela Steel
Scognamiglio: Here, too, we are dealing with two different worlds. New tenants will not be able to benefit from the current situation. For those who are already in a tenancy, there may be a short-term interest-dependent rent reduction in certain cases, but this should not be counted on.
What happens next?
Hasenmaile: Two things will determine what happens next: Firstly, the economic situation in the USA. A soft landing of the American labor market and the economy is currently expected. However, if a harder landing becomes apparent, more significant interest rate cuts will automatically be expected and interest rates will continue to slide.
Secondly, in this case the Swiss franc is likely to tend to appreciate. If the appreciation is too rapid and too severe, the SNB will probably be forced to react.
The future behavior of interest rates depends on global changes and the intervention of the SNB.
20min/Matthias Spicher
Scognamiglio: Predictions are always difficult in this area. Assuming that the situation in the world remains more or less the same, further interest rate hikes are expected, which in turn would result in a downward trend – but there is no certainty.
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