Most Swiss immediately associate mortgages with banks. Mortgages offered by insurance companies may also ring a bell among Swiss home buyers. But pension funds are one place where your average Joe or Jane won’t likely think of dropping by in search of the perfect mortgage.
The primary reason for this is that pension funds have made very little effort to market their mortgage products. The little marketing that is carried out generally only targets pension fund members, even though many pension funds accept mortgages from non-members as well. But despite the poor marketing, the ratio of mortgages provided by pension funds has shown a steady increase over the past decade.
Mortgages: An attractive investment vehicle
Triggered in part by the move to negative interest rates by the Swiss National Bank (SNB), 2015 saw an increasing number of pension funds, including the Aargauische Pensionskasse (APK) and the SBB/CFF’s pension fund, begin to make mortgages available to non-members.
Other major pension funds like BVK (the pension fund of the Kanton of Zurich) have long offered mortgages to home buyers throughout Switzerland, regardless of which pension fund they work with.
With bonds and other fixed yield securities running at a highly unattractive negative interest rate, offering loans in the way of mortgages has become a much more attractive investment for pension funds as a way to protect and grow fund wealth. Of course, there aren’t, as of yet, any clear indicators as to how long negative interest rates will last.
The unpredictability of SNB rates are one reason why pension funds do not provide mortgages with a loan tenure of more than 10 years. If interest rates where to go up, fixed yield investments like bonds may become more attractive, and low-interest fixed rate mortgages (FRMs) may seem like a risky investment by comparison.
Here we list the most important things to consider before getting your mortgage from a Swiss pension fund:
- Mortgage types: As a rule, Swiss pension funds do not offer LIBOR-based mortgages. A handful, including the SBB/CFF’s pension fund, have marginal LIBOR-based offers. The variable mortgages don’t exactly stand out from those offered by other kinds of lenders.
- Fixed rate mortgages are the main focus of pension funds, with forward mortgages also regularly being offered. The maximum loan tenure is typically 10 years.
- A moneyland.ch mortgage rates comparison shows that depending on the pension fund and loan tenure you choose, the interest rates offered on FRMs are often the lowest available nationwide, or at least very attractive. FRM rates offered by some pension funds easily compete with rates from cheap online mortgage providers.
- Some pension funds offer their members even better mortgages than those offered to the general public.
- Some pension funds collaborate with banks on their mortgage schemes. Others, like the SBB/CFF pension fund, originate and service mortgages on their own. Some (like Vita Joint Foundations from Zurich Insurance) offer mortgages from a third-party mortgage partner with no adjustment to the terms, while others offer special terms on mortgages provided by third-party partners (as is the case with the APK’s partnership with Aargauischen Kantonalbank).
- If for some reason you terminate your membership in a pension fund, you will normally still be able to keep your mortgage regardless of the change in membership.