Long-term mortgage interest rates to fall in Switzerland
Prospective homeowners in Switzerland will see mortgage interest rates become significantly cheaper over the coming weeks, making it far easier to buy a house. Mortgages in Switzerland had been expected to rise in cost over the coming year, but the conflict in Ukraine is forcing lenders to think again.
Mortgage interest rate rises in Switzerland slashed by a third in a week
According to mortgage broker MoneyPark, the average interest rate on the 10 best fixed-rate mortgages in Switzerland fell significantly in the first few weeks of March. In its latest assessment, the broker found the average interest rate on 10-year fixed-rate mortgage declined from 1,37 percent at the end of February to 1,31 percent now, with the best deal on the market being 1,05 percent.
MoneyPark attributed the fall in interest rates to the continuing effects of the war in Ukraine. They said that the conflict has wiped out a third of interest rate rises seen earlier in the year so far.
Russia’s invasion of Ukraine, and the subsequent sanctions imposed by Switzerland, the US and others, has led governments to exercise caution when announcing interest rate hikes to combat inflation, as they fear the wider economic implications of the conflict. According to Blick, the European Central Bank is expected to weaken or postpone its planned interest rate hikes initially proposed for March, as the war threatens to destabilise the global economy.
Economic forecasts remain uncertain
The forecast for the coming weeks predicted a slight decline in stock and monetary markets, depending on how the Ukrainian conflict develops and whether a more severe COVID variant emerges. Blick anticipated that lower mortgage interest rates for long-term policies will be available soon.
However, due to the volatile economic situation, MoneyPark said it expects a large rise in the cost of flexible rate mortgages, and mortgages for families with a higher risk of default. Chief among the reasons for the rise is the new capital buffer. This rule obliges Swiss banks to hold a higher amount of capital in reserve in the event of an economic crisis, which has made it more costly to lend out money to high-risk clients.