Higher interest rates affect the real estate market

Homes affordable despite higher interest rates

Despite increased mortgage interest rates, home prices remain affordable. The persistently high proportion of money market financing (SARON) indicates that buyers are optimistic and expect (key) interest rates to fall again in the long term. The possibility of deducting mortgage interest from taxable income also dampens the interest rate effect on the demand for home ownership, because this means that household finances are not fully burdened.

The increased mortgage interest rates have increased the financing costs for purchasing your own property. It is therefore expected that demand for home ownership will remain subdued for the time being. We assume that the Swiss National Bank has completed its interest rate hike cycle with the last interest rate hike in June 2023. As a result, interest rates on money market mortgages are expected to remain at current levels over the next few months. Fixed-interest mortgages, on the other hand, are becoming cheaper in our opinion.

The declining financial attractiveness of buying a home is leading to an increase in the available supply, which increases the scope for negotiation for potential buyers and puts regional pressure on price levels.