Swiss mortgage interest rates climbed steeply at the start of the year before sinking again until the middle of the year. By the end of August 2021, 10-year fixed-rate mortgages (FRMs) had sunk nearly back down to where they were at the start of the start of the year.
But since the end of August 2021, the cost of mortgages has drastically risen again. The average guide interest rates for 10-year FRMs climbed 0.20 percentage points from 1.11 percent at the end of August to the current 1.31 percent. “That means 10-year FRMs cost more than they have since March 2019,” notes moneyland.ch CEO Benjamin Manz.
5-year FRMs cross the 1 percent threshold
At the end of August, the published guide rates for 5-year FRMs sat at 0.93 percent – a multi-year low. Since then, the average rate has risen by 0.09 percent to 1.02 percent. That means 5-year FRMs, which generally vary much less than 10-year FRMs, are priced higher than they have been since April 2020.
15-year FRMs have gotten more expensive
The guide interest rates for 15-year FRMs have climbed from 1.35 percent at the end of August 2021 to the current 1.61 percent – nearly a multi-year high.
Fear of inflation is fueling interest hike
One reason for the climbing mortgage interest rates is the mounting fear of inflation, says moneyland.ch analyst Felix Oeschger. Market observers increasingly believe that the current higher inflation rates may not be a temporary development as was initially assumed by central banks. Longer-term or higher-rate inflation force central banks to raise their interest rates, which would make mortgages more expensive.
Yields in bond markets have climbed almost in sync with mortgage interest rates. The climb in interest paid out by 10-year Swiss federal government bonds shows a strong correlation with 10-year mortgages, climbing from -0.43 percent in August 2021 to -0.04 percent.
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