Mortgage interest rates: interest rate forecast and trend

As stated above, the Swiss National Bank sets the reference interest rate. In doing so, it pursues two main objectives that are an integral part of the Federal Constitution: to ensure price stability and to take account of economic developments. When issuing mortgages and setting the mortgage interest rate, banks are guided by the reference interest rate.

If it is low, it is cheap to take out a loan.

Banks’ refinancing or fundraising costs are the costs incurred by banks due to their own borrowing. To be able to grant loans, banks often borrow money from the Swiss National Bank, for example.

The key interest rate thus has an impact on the conditions at which banks offer mortgage loans. A rise in key interest rates can increase borrowing costs and discourage potential property buyers from taking out a loan. In this situation, many opt for a smaller loan.

In concrete terms, this means that mortgage interest rates can also affect the real estate market, acting as a brake on price increases.

To set the key interest rate, the Swiss National Bank monitors inflation. As part of its statistics, the Federal Office regularly publishes the inflation rate, which reflects price trends.

When inflation rises, the SNB usually raises interest rates. This is to prevent further price increases, as it is then more attractive to save money.

The best way to make interest rate forecasts is to look at the economy. If it is doing well, interest in capital also increases.

The “Purchasing Managers’ Indices” (PMI) act as an early indicator. This type of index is a survey that provides information about economic development in the coming months. It is made up of various sub-indicators such as new orders, production, employment, delivery times and inventories. If this index reaches a value above 50, this can be an indication of economic growth. The PMI in the USA is particularly relevant here, as the USA is known as the engine of global growth.

When it comes to interest rate forecasts, the key thing to remember is that balance is important. As long as the economy is neither running at full speed nor faltering, interest rates will remain low.

Any change in interest rates has the potential to torpedo a financing or investment strategy. That’s why central banks communicate their intentions well in advance and avoid sudden changes. While rate hikes are not welcomed, rate cuts are viewed positively. They increase companies’ willingness to invest.

As a rule, the Swiss National Bank is guided by the behavior of other central banks, particularly the European and American national banks. This is because Switzerland does not want to raise interest rates if the major economic zones are pursuing a policy of “cheap” money with low interest rates.

This would put Swiss exporters at a disadvantage because it would make their products even more expensive.

It’s a good idea to keep an eye on interest rate forecasts, as interest rates are constantly changing. For this reason, updates and corrections to previous forecasts and announcements by national banks are published on a regular basis.

If you subscribe to UBS’s interest rate forecasts, we will keep you regularly informed about current interest rate developments. Sign up for the newsletter here.

This mortgage is called a forward mortgage because it only becomes active at a later date. It is a means of securing a good interest rate. And you can do so up to 12 months in advance. In exceptional cases, it can even be set 18 to 24 months in advance.

For this, a “forward premium” is charged. This surcharge is usually included in the mortgage interest rate and is spread over the entire term of the mortgage. Bear in mind that the shorter the advance period, the lower the premium.

Secure a big advantage with UBS by fixing your interest rate 12 months in advance.

A mortgage composed of different tranches with varying terms safeguards you against rising interest rates for an extended period. However, the inclusion of SARON mortgages can also make sense, depending on the financing strategy.

This type of mortgage is suitable for those who regularly follow what is happening on the money and capital markets. In this case, it is important that interest rate fluctuations are affordable. At UBS, a SARON mortgage can be converted into a fixed-rate mortgage at any time.

Due to recent interest rate hikes, a fixed-rate mortgage is currently still a good option. With this mortgage, the interest rate is fixed, so if interest rates go up during the term, your mortgage will not be affected.

The SARON mortgage is suitable subject to certain conditions. With this mortgage, you will benefit when interest rates fall, but you are not protected against rising interest rates.

For this reason, we recommend that our clients combine different products with different terms.

Fixed-rate mortgages are suitable for those who want to budget their mortgage interest costs exactly. With this type of mortgage, you avoid any unpleasant surprises. The interest rate for the entire term is fixed so that it always remains the same and there are no sudden increases.

SARON mortgages are suitable for those willing to accept interest rate fluctuations. With this mortgage, an active interest in the money and capital markets is beneficial.

Following the SNB’s key interest rate cut in March, we expect the key interest rate to be reduced by a further 0.25 percentage points in June and again in September. We then believe that the SNB’s key interest rate will remain unchanged at 1 percent.

In general, the development of mortgage interest rates is characterized by uncertainty and volatility, making a clear forecast difficult. We recommend that you monitor mortgage interest rates with the updates in our newsletter. This will allow you to quickly identify and respond to any noteworthy developments.

The bond markets had already priced in three interest rate cuts of 0.25 percentage points each in the run-up to the SNB’s assessment. These are already reflected in the current longer-term interest rates. Longer-term Swiss interest rates are therefore also likely to trend sideways, as are fixed-rate mortgages with longer terms. Mortgage interest rates linked to SARON, on the other hand, are likely to benefit from the SNB’s further interest rate cuts in the next few quarters.

Changes in interest rates depend on both economic and individual factors. Economic factors include economic growth, inflation, monetary policy and the exchange rate. Individual factors include, for example, the creditworthiness of the borrower.

The development of interest rates depends on economic growth, inflation, monetary policy and the exchange rate. We expect the SNB to cut its key interest rate by 0.25 percentage points in both June and September 2024.. Discover the forecast in our graph.

A mortgage without a fixed term (e.g., a variable-rate mortgage) can be terminated at any time and thus redeemed, provided the notice period (usually three months) is observed.

Fixed-term mortgages (e.g., fixed-rate mortgages) can be redeemed at the end of the contract term.

Amortization means repaying part of the mortgage regularly and within a predefined period of time. There are two ways to do this: direct and indirect amortization.

In the case of direct amortization of a second mortgage, the debt is paid off in installments, which reduces the amount of the mortgage as well as the interest paid. However, less mortgage interest can be offset against tax. Indirect amortization is the process of depositing money into a retirement savings account, which offers tax advantages.