The expert expects a return to fixed-rate mortgages
The Saron mortgage is losing its appeal
Saron mortgages are popular because they sometimes have significantly lower interest rates than fixed rate mortgages. This is increasingly changing because Saron mortgages are associated with risk. Expert Donato Scognamiglio predicts a return to more fixed-rate mortgages.
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Financing your own home is getting more and more expensive, even with a Saron mortgage.
Jean Claude RaemyEconomics Publisher
Mortgage interest rates have been steadily increasing for months. This and the consistently high property prices have meant that many are no longer thinking about buying their own home.
Those who still had the means to buy a home often ended up choosing a Saron mortgage. These were significantly cheaper than fixed rate mortgages this year. The latter are often doubled. Furthermore, interest rate forecasts were very optimistic.
In the meantime, however, the Swiss National Bank (SNB) has raised the key interest rate to positive values, which is why Saron interest rates have also moved again. In other words: the Saron loses its price advantage over the fixed-rate mortgage.
Because Saron is risky
A Saron mortgage consists of the Saron reference interest rate and an agreed fixed margin. The interest rate is only communicated retrospectively at the end of the interest period. The interest rate is therefore variable. If this decreases, the costs for the interest recipient also decrease. If they increase, the borrower has to pay more.
This means: Due to the increase in interest rates in Saron, one would have to adjust one’s living situation. But many cannot do this. In an interview with «Cash” Real estate expert Donato Scognamiglio (52) says: “A Saron mortgage currently has an interest rate of around 1.8 percent, and if the SNB raises interest rates further, the Saron will also become even more expensive. It’s relatively easy to imagine that many want to go back to fixed mortgages.”
The fixed-rate mortgage offers security for the entire term. Many homeowners currently still have outstanding loan deals at low interest rates. So rising interest rates only become a problem when they have to renew their mortgage on higher terms.
Saron mortgages therefore amount to speculative business. Something that only people who can financially absorb a significant increase in interest rates should actually be able to afford. This once again raises the question of whether the banks have been too negligent in granting many Saron mortgages. Finma has already complained that loans were too often given to people with insufficient income.
By how much will mortgage rates rise?
Whether Saron or Fest: Most experts assume that interest rates will continue to rise. Inflation is consistently high in many places, which is why inflation may also persist in Switzerland. This in turn could encourage the SNB to raise interest rates further.
Scognamiglio: «I can well imagine that next year Saron mortgages will cost more than 2.5 percent and fixed-rate ones more than 3.5 percent». The result will be that fewer and fewer will be able to afford a home. And that migration to the (cheaper) country will continue to increase.
