The financing of the dream property is becoming more expensive. Mortgage interest rates have risen significantly in recent weeks. Banks are sometimes asking more than 2 percent for a ten-year fixed mortgage, as a study by Moneyland shows.
For people who are thinking about buying a property, there is a lot of money at stake. If you buy an apartment or a house for 1 million, you often mortgage the object with the maximum amount. That’s 80 percent of the purchase price. 800,000 francs. In this case, a 1 percentage point increase in the mortgage means: 8,000 francs higher interest costs per year. That’s almost 700 francs a month. Extrapolated over the entire term, it is about 80,000 francs.
After the Russian attack on Ukraine on February 24, Swiss fixed-rate mortgages initially became cheaper. This effect has now fizzled out. The background is fears about rising raw material costs and – associated with this – increasing inflation.
“The war in Ukraine is fueling the already high inflation, which speaks for a tightening of monetary policy or interest rate hikes,” says Felix Oeschger, an analyst at Moneyland.
Pension funds better than banks
At the moment, there are many indications that key interest rate hikes will also take place in Switzerland in the near future. “The high inflation in the USA and Europe definitely has the potential to drive up Swiss mortgage interest rates,” said Oeschger.
If you want to finance a property now, you should compare the offers. For ten-year fixed-rate mortgages, the difference between the cheapest and the most expensive provider is almost 0.8 percentage points. For five-year fixed-rate mortgages, it is 0.7 percentage points.
A market comparison also shows that pension funds often offer better conditions. While the average mortgage interest rate from Swiss banks and insurers is 1.35 percent for five-year fixed-rate mortgages and 1.73 percent for ten-year fixed-rate mortgages, pension funds only charge an average of 1.10 percent for five-year and 1.47 percent for ten-year fixed-rate mortgages.
However, it should be borne in mind that pension funds tend to be more restrictive when granting mortgages. For example, there are pension funds that only grant mortgages to their own policyholders or do not offer second mortgages.
This article first appeared in the digital version of the “Handelzeitung” under the title: “Mortgages are becoming more expensive: interest rates are rising significantly”
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