Swiss Fixed-Rate Mortgage Interest Rates Soar Since Early July

The moneyland.ch Swiss Mortgage Index tracks the average current reference interest rates for Swiss fixed-rate mortgages (FRMs). Currently, the average annual interest rates sit at 1.42 percent for two-year FRMs, 1.65 percent for five-year FRMs, and 1.89 percent for 10-year FRMs.

In July, the annual interest rates of Swiss fixed-rate mortgage offers rose drastically. Between July 1 and July 25, the average interest rate for two-year FRMs climbed by 0.21 percentage points to 1.51 percent. The average rate for five-year FRMs climbed by 0.24 percentage points to 1.73 percent. The average annual interest rate for Swiss 10-year FRMs gained 0.21 percentage points, reaching 1.97 percent per annum (refer to the Swiss Mortgage Index graph). 

The spike coincided with a renewed escalation of the Iran war, climbing oil prices, and climbing interest rates on Swiss capital markets.

Interest rates for two-year and five-year FRMs reached an annual high on July 25, while 10-year FRMs remained just below the annual peak. The average interest rates have come down somewhat since then, but remain far above their levels at the start of July. The relative calming in the Middle East and sinking oil prices may have played a role in that development.

Big differences between mortgage offers

The difference between the most and least favorable offers remains large. For two-year, five-year, and 10-year FRMs, the difference is around half-a-percent. “For a 500,000-franc mortgage, a difference of half-a-percent translates into around 2500 francs more or less interest per year. Comparing offers can save you money,” says moneyland.ch analyst Felix Oeschger.

There are also substantial interest rate differences between different sales channels. The average interest rates for online mortgages are between 0.18 and 0.27 percent lower than those of the other mortgage offers tracked by the index. The average interest rate for online 10-year FRM offers is 1.75 percent per annum, compared to 1.93 percent for other offers. It is important to note though, that this comparison does not present a full picture because the interest rates of online mortgage offers are typically not negotiable, while those of other mortgage offers usually are. 

Outlook

Inflation in Switzerland remains low, with a July inflation rate of 0.4 percent, as communicated by the Federal Statistical Office on Monday. At least where inflation is concerned, there is little immediate pressure on the Swiss National Bank (SNB) to raise its key interest rate. The low inflation is partly due to the relative strength of the Swiss franc. 

At the same time, developments in futures markets seem to indicate a possible increase in the SNB’s key interest rate in the first half of 2027. Markets have already priced in a rate increase in March, 2027. 

The constant swing between phases of escalation and deescalation in the Middle East have heightened insecurity about future Swiss fixed-rate mortgage interest rate developments. 

“Important factors like Swiss franc exchange rates, interest rates on capital markets, oil prices, and the geopolitical situation are currently exceptionally difficult to estimate. On the whole, I consider it most likely that the interest rates of FRMs will fluctuate sideways in the coming months. But there is always a chance of larger moves in either direction,” says Felix Oeschger.