In a few days, the Swiss National Bank (SNB) will make its decision on interest rates. Will it maintain, increase or lower its interest rate? Check out our assessment in the report below.
Evolution of interest rates
Fixed rate mortgages are cheaper than Saron, which remains stable
At the beginning of October, the guideline rates for two- and five-year mortgages exceeded the interest costs for Saron mortgages. The last time these rates were below the Saron was at the end of 2021. At the beginning of November, the ten-year mortgage followed suit and also fell below the Saron. The continued decline in fixed mortgages began around the middle of the year. At the start of December, the average interest rate for a 10-year term was 2.39%, compared to 2.81% in September and 3.11% in June. There is currently only 0.07% difference between two-year and five-year mortgages. For a two-year fixed-rate mortgage, the average rate is 2.29% and 2.22% for a five-year mortgage. In recent months, two- and five-year mortgages have mostly declined, almost at the same pace. Since the last increase of the SNB, the Saron mortgage has been very stable and is practically at the same level as in September, at 2.63%.
A change to fixed-rate mortgages is profitable again
Although fixed-rate mortgage rates have continued to fall over the past few months, one cannot automatically assume that they will follow this trend. Although the SNB is generally expected to keep its key rates at their current level and a cut is not expected before mid-2024, the SNB has always been able to surprise. For example, most experts predicted a further rate hike in September, but the SNB announced a pause. Switzerland is currently keeping inflation under control, but increases in health insurance premiums and rents will not be felt until January, which could have an effect on inflation and therefore on the SNB’s decision. People currently on a Saron finance contract should therefore consider switching (in part) to a fixed rate mortgage.
Forecasting the evolution of rates
Experts expect majority of rates to remain stable
Until three months ago, the majority of mortgage lenders surveyed expected capital market rates to remain stable for all durations. However, with the unexpected decision of the SNB to maintain rates at the same level, fixed rate mortgages have moved downward and crossed the Saron line. For the coming months, short-term mortgage rates are expected to remain stable, while the ten-year rate is expected to fall again.
For the coming months, short-term mortgage rates are expected to remain stable, while the ten-year rate is expected to fall again. For the next three months, two- and five-year mortgage rates are expected to remain stable, with a slight downward trend. Unlike short-term mortgages, respondents have more mixed expectations for ten-year mortgages.
As in the last survey in September, the greatest uncertainties regarding the evolution of rates are linked to inflation and a possible recession. The economic situation in the EU comes in third place. U.S. uncertainties and fear of rate hikes are about equal, but far behind.
Mortgage lenders surveyed expect policy rate to remain unchanged
Almost all mortgage lenders expect the SNB to maintain its key rate. The move would mean that Saron mortgages would remain at roughly the current level and long-term mortgages would become even more advantageous.
The survey was carried out among around fifty mortgage lenders via an online survey between November 15 and 29, 2023. Banks, insurance companies and pension funds participated.
Recommendations
- Currently, all fixed rate mortgages are cheaper than Saron mortgages. This is likely to remain the case over the coming months. It may therefore be interesting to switch from a Saron mortgage to a fixed rate mortgage.
- Fixed-rate (long-term) mortgages should remain the first choice for customers for whom planning and budget security is paramount.
- For those who need flexibility, for example to sell their property or to make repayments in the near future, a variable rate mortgage, a Saron mortgage or a mixture of a Saron mortgage and a fixed rate mortgage can be used. prove judicious. This also requires having the appropriate risk appetite.
- The best deal isn’t just about the interest rate. This also includes factors such as equity, income, amortization obligation, etc. Professional and independent advice is important to make a sustainable financing decision, adapted to the ability to take risks.
Click here to download the full assessment.
MoneyPark – independent mortgage and real estate specialist
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2023-12-12 05:46:08
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