On Thursday, the Swiss National Bank raised its key interest rate by 0.25 percentage points to 1.75 percent. That is the fifth consecutive rate change since the SNB began hiking its rate in June, 2022. The market had anticipated the change, as evidenced by the almost complete absence of changes to the published interest rates of Swiss fixed-rate mortgages.
Since the start of the year, the interest rates of fixed-rate mortgages have moved in a sidewards trend ranging between 2.4 and 3.2 percent, as shown by the moneyland.ch Swiss mortgage index. Current average annual interest rates for fixed-rate mortgages are 2.94 percent for 2-year FRMs, 2.85 percent for 5-year FRMs, and 2.87 percent for 10-year FRMs.
10-year FRMs are now cheaper than 2-year FRMs
As the average annual interest rates for FRMs reveal, mortgage lenders are, on average, no longer charging markups for longer mortgage terms. Currently, the 2.94-percent average published interest rate for fixed-rate mortgages with a 2-year term is even slightly higher than the 2.87-percent average rate for fixed-rate mortgages with a 10-year term. “That is an extraordinary situation, and it indicates that the market expects interest rates to come down again over the coming years,” observes moneyland.ch analyst Felix Oeschger.
By comparison: In mid-May, 2022, the interest rates of 2-year FRMs were, on average, more than one percentage point lower than those of 10-year FRMs. That made long-term mortgages attractive for many mortgage borrowers once again, compared to short-term FRMs and SARON mortgages.
Outlook
According to statements made last Saturday by the SNB’s president Thomas Jordan, the most recent rate change probably will not be enough to ensure long-term price stability. Many experts now anticipate another rate hike of 0.25 percentage points in September 2023. Whether or not we will see additional rate changes after that depends primarily on how the inflation rate develops.
The inflation rate went down slightly in the months of March, April, and May, compared to the same months in the previous year. But the inflation rate of 2.2 percent in May, 2023, compared to May, 2022, was still higher than the SNB’s target of 0 to 2 percent. “Until inflation sustainably falls below the 2-percent mark, we at moneyland.ch expect further rate hikes,” says Felix Oeschger. That also impacts mortgage interest rates, which may climb further over 2023.
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The Swiss mortgage index by moneyland.ch
The Swiss mortgage index by moneyland.ch is based on the published guide rates which are automatically obtained by moneyland.ch twice daily, and used in the mortgage comparison. The index for 10-year FRMs shows the daily average of interest rates from more than 30 Swiss lenders. Additionally, the index also includes longer-term FRMs, adjustable-rate mortgages (ARMs), construction loans, and SARON-based mortgages. In addition to the published guide rates of each lender, moneyland.ch also calculates various indicators like the median, arithmetic average, mode, minimum and maximum for various product groups such as online mortgages, bank mortgages, and mortgages offered by insurance companies. You can find current mortgage interest rates here. You can find useful mortgage calculators here.
