One in five Swiss homeowners risks default after interest rate rise, SNB says
By Jan de Boer
Experts have warned of a significant downturn in the housing market after the Swiss National Bank (SNB) raised interest rates by 0,50 percentage points last month. The SNB calculated that 20 percent of homeowners with mortgages in Switzerland no longer fulfil affordability requirements set by Swiss banks.
600.000 homeowners in Switzerland can no longer afford their houses
In June, the SNB raised key interest rates from minus 0,75 to minus 0,25 percent. This is coupled with large increases in the cost of mortgages in Switzerland, with Blick reporting that the average interest on fixed-rate deals has risen above the 3 percent mark.
The SNB confirmed that they are likely to raise interest rates again in September, which will have knock-on effects on the mortgage market. In their latest figures, the SNB calculated that with rates as high as they are, 20 percent or 600.000 homeowners now no long comply with their bank’s affordability rules for mortgages.
However, the bank was quick to stress that so long as these homeowners continue to pay their mortgage, they will not be repossessed. Despite this, SNB has warned of the increased risk of default, with many families and individuals now having to spend more than 30 percent of their income on servicing their mortgages.
Cost of renting in Switzerland expected to rise in coming years
Conversely, according to Sonntagszeitung, the higher interest rates have caused the cost of housing to fall by 0,4 percent in the first quarter of 2022. “The turnaround in interest rates heralds the end of speculation with free money. The time for absurdly high prices is over," real estate expert Donato Scognamiglio noted.
Finally, the newspaper said that higher interest rates will inevitably lead to an increase in the reference interest rate - the rate used by the SNB to calculate the cost of renting in Switzerland. Once the rate rises, as it is expected to do in the next two to three years, those who rent a house or apartment in Switzerland will also start to feel the pinch of higher prices.
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Jan studied History at the University of York and Broadcast Journalism at the University of Sheffield. Though born in York, Jan has lived most of his life in Zurich and has worked as a journalist, writer and editor since 2016.
While he has plunged head-first back into life in Switzerland since returning to the country in 2020, he still enjoys a taste of home at pub quizzes and karaoke nights.Read more