High rates impact the real estate market

Affordable owned properties despite rising rates

However, the rise in mortgage rates has not made purchasing a property inaccessible. The continued high level of financing on the money market (SARON) indicates that buyers remain optimistic and anticipate a fall in (key) rates in the long term. The ability to deduct mortgage interest from taxable income also mitigates the effect of rising mortgage rates on demand for owner-occupied housing, as it places less of a strain on household finances.

Rising mortgage rates have increased the costs of financing a home purchase. It is therefore expected that the demand for property will initially remain low. We expect the June 2023 key rate hike to be the last in the series of hikes decided by the SNB. Therefore, rates on money market mortgages are not expected to change in the coming months. Fixed-rate mortgages should instead become more affordable, according to our estimates.

The decline in financial attractiveness of purchasing property leads to an increase in available supply, which gives potential buyers better negotiating room and should curb prices on a regional scale.