Swiss Mortgage Rates Drop to Lowest Point in Two Years

Mortgage interest rates in Switzerland have dropped to their lowest point in two years, according to Moneyland. This means buying a house is becoming cheaper compared to renting in the long term. However, this drop in rates might lead to higher property prices.

Continued Decline in Mortgage Rates

Mortgage interest rates in Switzerland have been decreasing since their peak in 2022 and 2023. Moneyland reports that the average rate for a two-year fixed-rate mortgage is now 1.81%, 1.79% for a five-year mortgage, and 1.90% for a 10-year mortgage. These rates are the lowest since March 2022.

Felix Oeschger from Moneyland observed that long-term fixed rates have dropped by up to 0.5% in just three months. For example, in June 2024, rates were 2.31% for two-year, 2.33% for five-year, and 2.42% for ten-year mortgages. This decrease is due to lower inflation and the Swiss National Bank’s decision to cut the key interest rate to 1.25% in June 2024.

What Lower Rates Mean for Homebuyers

For people looking to buy a house in Switzerland, lower mortgage rates are expected to lead to more people buying homes. Fredy Hasenmaile from Raiffeisen and Donato Scognamiglio from Iazi said that owning a property is now cheaper than renting. They expect property prices to increase faster in the medium term.

Scognamiglio explained that if you have a fixed-rate mortgage, you will only benefit from lower rates when your current contract ends and you refinance. However, those with Saron mortgages, which are linked to interest rates, will see lower rates sooner.

Effects on Renters

Renters in Switzerland might also see some benefits. Hasenmaile noted that lower mortgage rates could lead to a decrease in the reference interest rate by March 2025. This means existing tenants may be able to apply for a rent reduction, though new rentals will not be affected by these changes.

Looking ahead, Moneyland expects the Swiss National Bank to cut rates again in September and December, which could keep mortgage rates steady or even lower them. However, there are still economic and geopolitical risks that might lead to an economic slowdown, which could further reduce mortgage rates.