The cost of Swiss fixed-rate mortgages has trended up again since the start of 2018, with rates reaching new heights in relation to the lows of previous years on a daily basis. On February 12, 2018, the arithmetic mean average interest rate of Swiss 5-year FRMs was 1.28% and that of 10-year FRMs was 1.73%. That is the highest that rates have been in more than 2 years.
5-year fixed-rate mortgage rates reviewed
In the first week of February the moneyland.ch index showed an arithmetic mean average interest rate for 5-year FRMs of 1.27% per annum. Mortgages obtained using online channels are notably cheaper, with an average rate of 1.04% per annum in the same week. On January 1, 2018, the average interest rate for 5-year FRMs offered by Swiss insurance companies and banks was 1.14%. By February 12, 2018, that average had jumped to 1.28%. “That is an increase of around 12.3% since the start of the new year” explains moneyland.ch analyst Felix Oeschger.
10-year fixed-rate mortgage rates reviewed
In the first week of February, the arithmetic mean average interest rate across all Swiss 10-year FRMs shown by the moneyland.ch index was 1.69% per annum. Broken down by mortgagee category, the average interest rate was: 1.71% per annum for 10-year FRMs from Swiss banks; 1.61% per annum for 10-year FRMs from Swiss insurance companies; 1.53% per annum for 10-year FRMs from online mortgage platforms. On January 1, 2018, the average interest rate for 10-year FRMs across all Swiss mortgage offers from banks and insurance companies combined was 1.51%, while on February 12, 2018 the average rate was 1.73%. “That is an increase of around 14.6%” explains Oeschger.
Interest on savings at historical low
While mortgage rates are climbing, the rates of interest paid by banks to depositors have been moving in the opposite direction. Many Swiss banks lowered their interest rates applicable to savings accounts, retirement accounts and medium-term notes at the beginning of February. Savings accounts for adults now pay arithmetic mean average interest of just 0.08% per annum while vested benefits accounts pay average interest of just 0.11% and 3a retirement accounts pay only 0.311% interest per annum on average. Private accounts (checking accounts) have paid out 0% interest on average for some time now.
However, a look at historical interest rates shows that FRM interest rates are much more volatile than the interest rates of savings accounts. Savings account interest rates are only adjusted periodically, but fixed-rate mortgage rates are adjusted on a daily basis. "While we have witnessed a number of small upward movements in fixed-rate mortgage rates since 2008, the interest rates of savings accounts have steadily decreased since that year” clarifies moneyland.ch CEO Benjamin Manz.
Notable differences in mortgage rates between banks
While the rates used by different mortgagees follow general trends in mortgage rates, there are major differences in the interest rates used by different banks and insurance companies. “The interest charged by the mortgagee with the highest interest rate may be more than twice as much as that charged by the mortgagee with the lowest interest rate” says Felix Oeschger. For example, the indicative rates currently advertised for 5-year, fixed-rate mortgages range between 1.4% and 2.36% per annum. Indicative rates for 10-year FRMs range between 1.4% and 2.36%, while rates for 3-month LIBOR mortgages range between 0.59% and 1.2% per annum. Performing a comparison of mortgage interest rates is key to saving on interest charges.