More expensive festival mortgages: The time of cheap money is over for real estate buyers

More expensive fixed-rate mortgages: The time for cheap money is ending for property buyers The key interest rate in Switzerland remains at 0 percent, yet your own home is becoming more expensive. The price jump hits many homeowners unprepared, often just at the time of refinancing. Inflation and interest rates are circulating around the globe. Many Swiss homeowners are remaining calm. After all, the Swiss National Bank (SNB) keeps its key interest rate unchanged at zero. Therefore, one is convinced that one's own mortgage will remain very cheap. But the banks calculate differently. A ten-year fixed-rate mortgage costs around 2 percent according to published guidelines, half a percentage point more than in March. For 800,000 Swiss francs, this is an additional 4,000 francs in interest costs, year after year. Stefan Bestler, head of mortgage advisory at VZ Vermögenszentrum, knows the surprise of many customers. A common thought is: "Why sign a fixed-rate mortgage for 2 percent today when I would have paid only 1.5 percent half a year ago?" Flight to Saron mortgages The Saron mortgage operates by its own rules. It is based on the money market, tied to the SNB's key rate, and has been spared from interest rate increases so far. At around 1 percent, it is currently the cheapest option and in demand. Florian Schubiger, founder of the platform hypotheke.ch, notes: "The share of Saron mortgages has increased from about one-third in March to now over 40 percent." For Schubiger, this is a gamble on the money market, and not a harmless one. After years of cheap money, many took low interest rates for granted. But as inflation rises, Saron quickly follows. "Whoever cannot bear higher interest rates or sleeps poorly because of them is still better off with a fixed-rate mortgage," Schubiger advises. Why are Saron and fixed-rate mortgages so far apart currently? Saron reflects today's key rate. Fixed-rate mortgages, on the other hand, reflect the level at which the capital market sees interest rates in the coming months and years. And this expectation has shifted. In the USA and the Eurozone, inflation remains persistent. Expensive energy, excessive government debt, and billions of investments in artificial intelligence are driving up sovereign bond yields worldwide. Switzerland is in a better position. Inflation remains within the SNB's target range, and the strong franc somewhat dampens high energy prices. However, rising interest rates abroad reduce the upward pressure on the franc. This gives the SNB more room to raise the key rate. The market already anticipates one or two rate hikes for 2027. The banks feel this in the so-called swap rate. It shows at what price a bank can secure a fixed interest rate over a certain term and forms the basis of every fixed-rate mortgage. The five-year rate has doubled since January, and the banks pass on the spread almost one-to-one. Banks apply a margin to the interest rate on the capital market, and depending on the customer, they also grant discounts. If the swap rate for five years is 0.6 percent and the margin is, for example, 1 percent, the five-year fixed-rate mortgage costs 1.6 percent. Historically, interest rates are still moderate. In addition, the yield curve is flat; long terms cost hardly more than short ones. "If you are securing something, it makes sense to sign a longer fixed-rate mortgage with an eight or ten-year term," says Bestler from VZ. Fixing tomorrow's mortgage today Experts recommend that all customers deal with interest rates. Those who still benefit from a previously fixed low rate may have to refinance a larger tranche next year. Of course, not necessarily, but it is at least worth considering so-called term or forward mortgages. This allows the customer to fix a refinancing in 6 or 12 months in advance. Some banks even offer this for terms of 3 months without additional costs. Furthermore, the margins vary considerably depending on the provider and interest rate expectations. It is worth checking and comparing offers. The premium is currently low thanks to the flat yield curve and is completely absent depending on the provider and term. Bestler still urges calmness. "It is certainly a good idea to deal with it," says the expert. Securing in advance is however somewhat like a lottery. No one can "reliably predict what fixed-rate mortgages will cost in a year." The "shelf price" is misleading There is also a large saving potential in the choice of provider. Marc Moser from the financial service provider Barron Capital advises never to blindly sign the first extension offer from the home bank. There are "enormous differences" in the market. The officially published guidelines of the banks and other providers are usually "shelf prices." Currently, according to Moser, the guideline prices for five-year fixed-rate mortgages are around 1.9 percent, and for ten-year terms around 2 percent. But with good financial feasibility, at least 20 percent equity, and a common, self-occupied property, ten-year fixed-rate mortgages can be obtained from as low as 1.6 percent. "Insurance and pension funds offer lower interest rates for fixed-rate mortgages than most banks," says Marc Moser. And it also applies: competitive offers are the best leverage against your own bank, which often is not willing to negotiate much in a first request. No return to normal The ZKB expects an interest rate of 0.75 percent for the coming year. Saron customers will feel this immediately. Also, for the swap rates and thus for fixed-rate mortgages, the bank sees an "upward pressure on interest rates" in the next twelve months. Buyers of owner-occupied residential property have not been disturbed by this so far; demand remains strongly unbroken. In the market for rental properties, where interest costs and returns decide more than the price, experts expect a decreasing willingness to pay. This process has already begun in the stock market. Since the end of June, the capital value, the premium over the "intrinsic value," of real estate investment funds in rented properties has significantly fallen from 34 to 28 percent according to the ZKB.