Those waiting for lower mortgage rates could lose out

Many homeowners currently have their mortgages with Saron. They hope to be able to switch to a long-term fixed-rate mortgage with more favorable terms later on. However, the latest bank survey by Moneypark points in the opposite direction. The institutions expect interest rates to rise for long-term loans.

According to Moneypark, the average benchmark rate for a 10-year fixed-rate mortgage is 2.06 percent. It has risen by 0.08 percentage points since mid-June. The most favorable offers are around 1.60 percent, but they require an excellent credit rating, a low loan-to-value ratio, and active negotiation. Terms have also become more expensive for shorter-term fixed-rate mortgages. In September, the average benchmark rate was 1.83 percent for a five-year term and 1.59 percent for a two-year term. Both figures have risen by 0.14 percentage points since June.

At first glance, the shift may seem small. For a mortgage of one million Swiss francs, however, an increase of 0.3 percentage points translates to additional costs of 3,000 Swiss francs per year. The choice of timing and term therefore remains financially significant.

The SNB Doesn’t Determine Everything
Many mortgage customers focus primarily on the Swiss National Bank’s key interest rate. This is correct for Saron mortgages. The Saron is based on short-term money market rates and reacts directly to the SNB’s monetary policy.

Fixed-rate mortgages follow a different logic. Banks hedge long-term maturities through the capital market. That’s why 10-year fixed-rate mortgages are more closely tied to so-called swap rates than to the current SNB key interest rate. If expectations for inflation and long-term interest rates rise internationally, the cost of hedging for Swiss mortgages also increases.

Interest rate pressure is coming from abroad
Switzerland continues to benefit from moderate inflation and the strong Swiss franc. As a result, mortgage rates remain low by international standards. According to Moneypark, since 2022, long-term mortgage rates in Germany and the United Kingdom have risen about four times as much as in Switzerland, and in the U.S. as much as five times as much.

However, Switzerland cannot completely escape this trend. Higher government debt, infrastructure programs costing billions, and investments in artificial intelligence are increasing global demand for capital. This is keeping long-term yields and interest rates at a higher level. For Switzerland, this does not mean an abrupt jump. It does mean, however, that particularly long-term fixed-rate mortgages are unlikely to return to the exceptionally low rates seen before 2022.

The Saron remains affordable, but open
The three-month Saron stood at 1.04 percent in September and has remained unchanged since mid-June. This explains why many homeowners are opting for short-term financing. The Saron is currently usually more affordable than a fixed-rate mortgage and offers flexibility.

This flexibility has a downside. Those who stay with the Saron bear the risk of future key interest rate hikes and lack planning certainty over many years. While banks currently expect the SNB to keep its key interest rate at zero percent for the time being, the majority do not anticipate a first increase until the first quarter of 2027.

The right term is a personal decision
The right mortgage isn’t determined by an interest rate forecast alone. It depends on your ability to pay, your equity, your loan-to-value ratio, and your next life or investment steps. Those who plan to stay in their home long-term and want to avoid rising costs gain, above all, budget and planning security with a fixed-rate mortgage.

Medium-term loan terms of two to five years can be an alternative. They limit short-term interest rate risk without locking in financing for a decade. For larger mortgages, splitting the loan into several tranches may also make sense. The key is not to aim for the absolute lowest interest rate. What matters is securing financing that remains sustainable even if interest rates don’t move as hoped.