Swiss reference rate cut: How you can apply for a rent reduction

On March 3, the Federal Housing Office (BWO) cut the reference interest rate (Hypothekarischer Referenzzinssatz) from 1,75 to 1,5 percent. Here’s what the news means for renters, and why most tenants will now be entitled to a rent reduction.

How to apply for a rent reduction in Switzerland

On Monday, the BWO confirmed that after hiking the reference interest rate twice in 2023, it would now be cutting the rate from 1,75 percent to 1,5 percent. For months, experts have been predicting that the rate would be cut, as the average interest rates quoted in Swiss mortgages - the factor used to calculate the reference rate - fell to a two-year low in 2024 and have continued to fall since.

The news will be warmly received among those who rent a house or apartment in Switzerland, as a drop in the reference rate means they will now be eligible for a rent reduction. Here’s what tenants need to know:

Who is eligible for lower rents?

As it stands, you will be able to apply for a rent reduction if your rent is based on a reference interest rate of 1,75 percent or higher. Generally, these are people who started to rent their home after December 2, 2023, those who started renting their home beforehand whose landlords increased their rent in line with the 1,75-percent rate, and those who started to rent their home before March 2, 2016 and have never applied for or received a rent reduction.

All told, over half of tenants in Switzerland are expected to qualify for a rent reduction. Be sure to check what reference rate you are being charged by looking at your rental contract.

Rental contracts with indexed, staggered or state-subsidized rents, such as those found in housing cooperatives, are not covered by the drop in the reference rate. Fixed-term rental contracts are also not covered.

By how much will rents fall?

With a 0,25 percentage point reduction in the reference rate, landlords are required to reduce rents by 2,9 percent. However, landlords are able to offset the right to a reduction by between 0,5 and 1 percent during times of inflation.

Therefore, UBS predicts that tenants will see their rents fall by an average of 2 percent. Nevertheless, the bank noted that the cut will mean that someone who pays 3.000 francs a month for rent can save 720 francs a year.

How do I apply for lower rent using the reference rate?

Though some landlords will reduce their rents voluntarily, in most cases, it is up to the tenant to apply for a rent reduction. Before you start your application, make sure you have a right to a reduction. This can be done by using online tools, such as the one provided by the Swiss Tenants’ Association.

Once this is done, you must contact your landlord by post, informing them of your request for a rent reduction using the reference interest rate as evidence. This letter should include:

• The address of the sender, landlord, place and the date
• An explanation that the BWO has lowered the reference interest rate from x to y percent
• A request to reduce net rent accordingly from the next possible date of termination
• A request to receive confirmation from the landlord within 30 days, and an explanation if the request for a rent reduction is denied
• Signatures from all of the tenants listed on the original rental agreement

Your landlord is required to respond to your request within 30 days. If they reject your request, they must explain their reasons for doing so. 

If you do not believe the reason is fair or justified, you are able to appeal the decision, as long as you respond within 30 days of receiving their reply. If you are unsure of their reasons or want extra clarity on whether you should appeal, it is best to consult a lawyer.

When will the lower rent begin?

When your rent will fall will depend on your canton of residence and the nature of your rental contract. However, the lower rent will typically apply from the next valid termination date.

Will rental costs in Switzerland continue to fall?

Though the most recent interest rate cut was considered a forgone conclusion, predicting whether the rate (and rents in Switzerland) will rise or fall again remains a challenge. Though the Zürcher Kantonalbank predicts that the rate will rise back to 1,75 percent by early 2028, falling inflation and the continued strength of the Swiss franc means that a future cut in the reference rate could also be on the cards.