How the Mortgage Reference Rate Affects Your Rent in Switzerland

For many Swiss households, rent is one of the biggest expenses. That makes rent increases all the more painful, and rent reductions all the more relieving. In Switzerland, even the rent you pay for an ongoing rental contract can be raised or lowered while you are renting a home because of the mortgage reference rate. Here, moneyland.ch answers to the most important questions:

What is the mortgage reference rate?

The mortgage reference rate is an indicative rate which is based on the average interest rates of mortgages from Swiss banks. If mortgages become more expensive, the mortgage reference rate goes up. If they become cheaper, the reference rate goes down.

The rents charged for rental housing in Switzerland are linked to the mortgage reference rate. If the reference rate climbs, landlords are allowed to raise rents accordingly. If the reference rate sinks, renters are entitled to demand a corresponding rent reduction.

The mortgage reference rate was established in 2008 and moves in increments of 0.25 percent. Due to rounding, the mortgage reference rate may remain unchanged over long periods of time, even over periods in which average mortgage costs fluctuate lightly.

What is the purpose of the mortgage reference rate?

The mortgage reference rate is meant to indicate the cost of financing property purchases and ensure that rents are lower when mortgages are cheap, and vice versa. Up until 2020, renters were at the favorable end of this arrangement: Property financing became steadily cheaper, resulting in landlords lowering rents accordingly, to some extent. Since the end of 2022, the trend has reversed. Mortgages are becoming notably more expensive again, so landlords will be able to demand more rent.

Does my rent change every time the mortgage reference rate changes?

No. Your landlord has to inform you about adjustments to your rent in keeping with the correct process before any changes can take effect. If they do not, then your rent will remain unchanged. For your part, you have to actively request a rent reduction if the reference rate goes down. Your landlord has no obligation to automatically lower your rent when the reference rate sinks.

Another important requirement for a rent increase or reduction is the reference rate used in the existing rental agreement differs from the current mortgage reference rate. For example, if the mortgage reference rate were to be raised to 2 percent, the landlord could only raise your rent if the reference rate in your rental contract was lower than 2 percent.

How can I find out which reference rate applies to my rental agreement?

The reference rate for your rental agreement is normally stated in the contract itself. If it is not, then the mortgage reference rate published by the Swiss federal housing authority (BWO) at the time that the contract was signed applies. You can find a list of all published reference rates and the dates from which they applied on the BWO’s website.

What should I do if my rental agreement uses a higher reference rate?

If the current mortgage reference rate is lower than the rate stated in your rental contract, then you are entitled to claim a rent reduction. On the other hand, if the current reference interest rate is identical to the rate used for your rental agreement, then your rent will remain unchanged.

How much more rent will I have to pay?

For every increase in the mortgage reference rate of one 0.25-percent increment, your landlord is allowed to raise your rent by 3 percent. So a 0.5-percent increase would entitle your landlord to raise your rent by 6 percent, and so on (see table 1). Example: If your home rental contract is based on a reference rate of 1.5 percent and the rent is 2000 francs, your landlord could raise your rent to 2060 francs if the mortgage reference rate were to rise to 1.75 percent.

Table 1: Mortgage reference rate increase

How much less rent will I have to pay?

If the mortgage reference rate goes down, renters can claim rent reductions. The size of the reductions depends on the difference between the new mortgage reference rate, and the old rate which applied before the change. The rent reduction you can claim, as per a rough calculation, is just under 3 percent for every 0.25-percent change in the reference rate – but the bigger the change in the reference rate is, the lower the reduction per increment is (see table 2).

Table 2: Mortgage reference rate decrease

When might my rent go up?

The BWO announces changes to its mortgage reference rate four times per year (at the beginning of March, June, September, and December). A new reference rate takes effect on the day following the announcement. Your landlord may only announce a rent increase once the change to the reference rate has been published – and only if the reference rate used for your rental agreement is lower. The same applies to renters who want to claim rent reductions when the reference rate goes down.

Although the new reference rate already becomes valid the day after it is announced, a landlord cannot raise the rent without giving due notice. The rent can only be raised from the next possible contract termination date as per your rental agreement. Additionally, the landlord has to inform you about the rent increase at least ten days before the required notice period begins. So, the earliest that you can be charged the higher rent is from the next contract termination date which follows the announcement of a mortgage reference rate hike.

Can I dispute a rent increase?

If the mortgage reference rate goes up, your landlord has the right to raise the rent in keeping with the rate adjustment. As long as they keep to the required notice periods and meet their obligations to make repairs, you cannot dispute the rent increase.

However, you are free to terminate your rental agreement if you are not willing to pay the higher rent, because the rent can only be changed from the next contract termination date. If you believe that a rent increase is unacceptable, you can file a dispute with your district’s arbitration authority.

Is my landlord allowed to raise my rent if the mortgage reference rate does not change?

Yes. Apart from the mortgage reference rate, there are other factors which may entitle your landlord to raise your rent. You can get informed about these in the guide to rent increases in Switzerland.

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