After the National Bank’s key interest rate cut: wait before buying a house or take out a mortgage now?
The National Bank has reduced the key interest rate again. Mortgage interest rates were already falling. What does this mean for the Aargau real estate market? What can we expect from the future?
Falling interest rates are likely to lead to cheaper mortgages. On the other hand, real estate prices are rising. In the picture: the construction of the new quarter on Wiesenweg in Rupperswil.
Image: Sandra Ardizzone (Archiv)
After a tense 2023, characterized by interest rate increases but with positive market developments at the end, it was already expected that 2024 could be a year of interest rate cuts. UBS signaled this in January at its “Year Ahead 2024” event tailored to Aargau, which Credit Suisse and Neue Aargauer Bank had traditionally held in the past.
In the meantime, however, people were no longer so sure how far interest rates would fall. In the summer, for example, the Zürcher Kantonalbank and the Swiss Life insurance company said that the Swiss National Bank would no longer lower key interest rates until the end of the year “if the franc does not appreciate significantly.”
Now, at the end of the third quarter, interest rates did fall. Shortly before the National Bank’s decision, announced on Thursday, to cut the key interest rate by 0.25 percentage points, UBS chief economist Daniel Kalt wrote in his “Thought of the Week” on Linkedin: The Swiss franc has recently appreciated again, which supports an interest rate cut.
UBS chief economist Daniel Kalt in January at the “Year Ahead” event in Aarau.
Image: Alex Spichale
The decisive factor could have been the decision from the USA to reduce interest rates there. Further interest rate steps are now likely to follow. Kalt says: “The extent to which the National Bank will increase interest rates again depends, in addition to the future course of inflation, on how much the franc tends to strengthen on the foreign exchange markets. Investors should definitely prepare for a phase of lower interest rates.”
The National Bank itself signaled that the key interest rates in Switzerland will continue to fall in its press release last Thursday, in which it said: “Further interest rate cuts may be necessary in the next few quarters.” Last week, the bank J. Safra Sarasin said it was convinced that Swiss key interest rates would be cut by 0.25 percentage points in December and March.
Are mortgage interest rates now falling in Aargau?
Lower key interest rates bring the prospect of lower mortgage interest rates. Moneypark, which also brokers mortgages in Aargau together with the insurance company Helvetia, wrote at the beginning of last week that the end of the third quarter showed “a real decline in mortgage interest rates”. Fixed-rate mortgages are already around half a percent cheaper than they were in the middle of the year.
The majority of mortgage providers expected the key interest rate cut and, according to Moneypark, had already priced it into the fixed-rate mortgages on offer. Short- and medium-term fixed-rate mortgages are likely to remain attractive. However, Moneypark believes a slight increase is possible for longer terms.
The largest provider of mortgages in the canton, Aargauische Kantonalbank (AKB), gives the following assessment upon request: “The key interest rate cut offers opportunities due to lower financing costs – whether further interest rate cuts will follow is uncertain.” But there will be no major shifts, according to the AKB, especially since the reduction was expected. However, it could make sense to “still protect yourself in the long term with a fixed-rate mortgage”.
Interest rates are falling, but prices are rising
Although interest rates could fall, real estate prices are likely to continue to rise. “Demand remains high given the solid economy and high levels of immigration,” explains the AKB. “Real estate prices are stable and rising in some cases.”
The bank J. Safra Sarasin also says: With the lower interest rates, prices are likely to rise even faster. On the other hand, building could become cheaper again, meaning that the housing supply could catch up somewhat compared to the persistently high demand.
In many Aargau communities, the housing supply does not meet demand. In the picture the popular residential area on the hillside in Gibstorf.
Image: Sandra Ardizzone
