The average interest rate for mortgages in Switzerland has fallen to a two-year low, according to a new report from Moneyland. While the news means that buying a house is set to be cheaper than renting over the long term, the lower rates are expected to cause price hikes for property.
Average mortgage interest rates in Switzerland have continued to fall from the peaks they achieved in 2022 and 2023. According to Moneyland, the average interest rate for a two-year fixed-rate mortgage now stands at 1,81 percent, at 1,79 percent for five-year deals and 1,9 percent for 10-year deals, rates unseen since March 2022.
Moneyland analyst Felix Oeschger noted that fixed rates for long-term deals have dropped by up to half a percentage point in just three months - in June 2024 rates for two, five and 10-year mortgages stood at 2,31, 2,33 and 2,42 percent respectively. The falling rates are seen as a response to falling inflation, and the Swiss National Bank’s subsequent decision to cut the key interest rate to 1,25 percent in June 2024.
What does this mean for those looking to buy a house in Switzerland? Speaking to 20 Minuten, chief economist at Raiffeisen Fredy Hasenmaile and Donato Scognamiglio from real estate consultancy Iazi said they expect the lower rates to trigger a wave of house buying. “The cost advantage of owning a property has returned and "buying" is now cheaper than "renting". As a result, we expect prices to grow somewhat faster in the medium term,” Hasenmaile predicted.
Scognamiglio explained that for those with fixed-rate plans - the type of Swiss mortgage used in 80 percent of deals - the lower rates will only benefit homeowners when their contract comes to an end and they refinance. Those on interest rate-tied Saron mortgages will see lower rates arrive much sooner.
There is good news for those who rent a house or apartment in Switzerland: Hasenmaile noted that lower mortgage rates should lead to a drop in the reference interest rate by March 2025 at the latest. This means that following the automatic rent rises seen last year, tenants on existing rental contracts will finally be able to apply for a rental reduction - though the lower rates will have no impact on new tenancies.
Looking ahead, Moneyland noted that with the Swiss National Bank expected to cut rates again in both September and December, interest rates for mortgages will “remain constant or even fall."
"However, economic and geopolitical risks remain elevated, and the scenario of a significant economic slowdown cannot be completely ruled out," Oeschger noted. If this happens, mortgage rates are expected to drop even further.
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