Changes in the Swiss mortgage market after key interest rate cut
Despite an unexpected cut in the key interest rate by the SNB, there is a clear decline in demand for SARON mortgages, while interest rates for fixed-rate mortgages remain stable and are gaining popularity.
Following the surprising reduction in the key interest rate by the Swiss National Bank(SNB), mortgages based on the Swiss Average Rate Overnight (SARON) reference interest rate have become more favourable, while interest rates for fixed-rate mortgages have remained virtually unchanged. However, demand for SARON mortgages fell drastically year-on-year in the first quarter of 2024, Comparis reports in a press release on the comparison portal’s latest mortgage barometer. At Comparis mortgage partner HypoPlus, the share of SARON mortgages fell from around 25 per cent to around 3 per cent.
At the same time, the share of fixed-rate mortgages with a medium term increased from around 20 per cent to around 33 per cent. At just under 50 per cent, the share of fixed-rate mortgages with a term of ten to 15 years was roughly the same as in the same quarter of the previous year. “In an environment of great uncertainty, fixed-rate mortgages with the longest possible term offer a high degree of planning security,” explains Comparis financial expert Dirk Renkert in the press release.
According to Renkert, fixed-rate mortgages had already become more favourable by the end of 2023, as the market had assumed that key interest rates would be cut in 2024. With market interest rates of 1.7 to 1.8 per cent for ten-year fixed-rate mortgages, these continue to be more favourable than SARON mortgages. In order for SARON mortgages, which currently have interest rates of 2.1 to 2.3 per cent, to catch up with fixed-rate mortgages, “at least one, if not two, interest rate cuts” by the SNB will be necessary, says Renkert.