Interest rate forecast for mortgages

Interest rate forecast for mortgages

Following the Swiss National Bank’s (SNB) new policy rate reduction, SARON mortgages will become even cheaper. However, fixed-rate mortgages still remain attractive due to the low level of capital market interest rates.

Current economic outlook

Status as at: 26.09.2024
Editorial deadline: 26.09.2024

As part of its monetary policy assessment at the end of September, the SNB has decided to reduce the policy rate  to 1.0 percent. The attractiveness of SARON mortgages has risen again as a result. For the SNB, this was the third relaxation to monetary policy in a row. These measures can primarily be understood as a reaction to the changing international environment. Both the US Federal Reserve and the European Central Bank have begun their interest rate reduction cycles and are likely to continue pursuing these in the next 12 months. Under these circumstances, the SNB will probably be anxious to avoid excessive upward pressure on the Swiss franc.

At the same time, the interest rate reduction reflects the persistent weakness of the Swiss economy . The sluggish performance of domestically oriented economic sectors has contributed to a further fall in inflation , creating the scope to relax monetary policy. By cutting interest rates, the SNB is also pursuing the goal of restimulating domestic demand and investment activity in particular.

Unlike SARON mortgages, however, the positive effects on fixed-rate mortgages are likely to be limited. Long-term capital market interest rates  are already exceptionally low, with expectations of further significant relaxation measures by the SNB already factored in. We do not believe that this level appears sustainable over the long term, primarily because the SNB is likely to want to avoid a return to zero interest rates.

Interest rate forecast for PostFinance mortgages

We expect mortgage interest rates to fall slightly in the next three months. During the coming year, we anticipate a further interest rate cut by the SNB and therefore lower SARON rates due to the predicted relaxation of monetary policy by the major central banks. A gradual recovery of the Swiss economy could again lead to a slight rise in interest rates for fixed-rate mortgages during this period.

Forecast for3 months6 months12 months
Forecast for
Saron
3 months
6 months
12 months
Forecast for
5-year fixed-rate mortgae
3 months
6 months
12 months
Forecast for
7-year fixed-rate mortgage
3 months
6 months
12 months
Forecast for
10-year fixed-rate mortgage
3 months
6 months
12 months

Key for table 〉 ­­

Development of mortgage rates in Switzerland

Following the tightening of monetary policy and the increase in inflation rates after the COVID-19 crisis, interest rates and therefore costs for medium- and long-term fixed-rate mortgages in Switzerland rose considerably, reaching their highest level for more than 10 years in spring 2023. Since then, however, interest rates have been falling. In particular, the turnaround in monetary policy in March this year was met with further falls in interest rates on the capital market and, in turn, for medium- and long-term fixed-rate mortgages. The costs for these mortgages are now significantly lower once again, although they remain higher than they were before monetary policy was tightened in spring 2022. Despite a possible further fall in money market interest rates in the next year, we expect that long-term interest rates and therefore the costs for fixed-rate mortgages may rise again slightly due to the gradual recovery of the Swiss economy.

In percent

The graphic shows the interest performance for five- and ten-year fixed-rate mortgages and the three-month SARON since the 2008 financial crisis. After a long phase of expansive monetary policy and falling interest rates, the interest level has increased significantly over the past two years. Following the relaxation of monetary policy this year, however, interest rates for fixed-rate mortgages are falling once again.
Source: SIX, figures up to and including December 2021 based on Libor and from January 2022 on Saron.

A Saron or fixed-rate mortgage

The PF attractiveness index continues its sideways trend, signalling that money market financing  is increasingly able to compete with fixed-rate mortgages again. The SNB’s policy rate cuts – of which there have now been three this year – have made money market financing considerably more attractive. Fixed-rate mortgages are still more attractive than money market financing options due to historically low capital market interest rates. However, this situation could change in the next 12 months. Firstly, we anticipate a further policy rate cut in spring. And secondly, we expect fixed-rate mortgages to become slightly more expensive over the course of the next year. 

This graphic shows the development of the attractiveness of fixed-rate mortgages. As part of efforts to tackle inflation, Swiss policy rates rose sharply after the COVID-19 crisis. This made fixed-rate mortgages more attractive. The relaxation of monetary policy is making SARON mortgages less expensive again and, in turn, more attractive.
Source: PostFinance Ltd, SNB, SIX, Web Financial Group, SECO, KOF
  • At PostFinance, you’ll find the ideal financing solution for your property. A mortgage with a fixed rate or one where you can decide on the level of risk and security for yourself? We offer individual solutions to finance the purchase of your own home.

    Fixed-rate mortgage

    Perfect when interest rates are low and expected to rise You’re protected against interest rate rises and can plan your costs precisely.

    Term and interest rate

    Saron mortgage

    The Saron mortgage is ideal when interest rates are high to average and when rate cuts are expected. The interest rate can fluctuate significantly during the term, depending on the market situation. However, the option of switching to a PostFinance fixed-rate mortgage during the term means you remain flexible.

    Term and interest rate

  • Single-family homes and condominiums

    Prices for rental apartments are continuing to trend sideways. The prices for single-family homes have also risen again in the last quarter, after stabilizing briefly in the previous quarter. This development was spurred on by the decline in long-term capital market interest rates. By contrast, prices for owner-occupied apartments fell significantly in the third quarter and are currently lower than at the end of last year. In light of the relaxation to monetary policy, potential apartment buyers might be hoping for further drops in financing costs and waiting to make their purchases, which may have been reflected in lower offer prices.

    Price index, January 2000 = 100

    The graphic shows the price trend for single-family homes, rental properties and apartments. After prices for owner-occupied properties and, in particular, single-family homes rose sharply during the COVID-19 crisis, there were signs of normalization. However, prices have soared again of late.
    Source: SFSO

    Interested in real estate as an investment opportunity? In our Investment compass under “Market overview”, you will find an analysis of the current real estate market in Switzerland.

  • IndicatorsQ4 2023Q1 2024Q2 2024202320242025
    Indicators
    GDP growth
    Q4 2023
    0,5%
    Q1 2024
    0,6%
    Q2 2024
    1,8%
    2023
    0,7%
    2024
    1,8%
    2025
    1,4%
    Indicators
    Inflation
    Q4 2023
    1,6%
    Q1 2024
    1,2%
    Q2 2024
    1,4%
    2023
    1,3%
    2024
    1,2%
    2025
    1,0%
    Indicators
    Unemployment
    Q4 2023
    2,2%
    Q1 2024
    2,4%
    Q2 2024
    2,3%
    2023
    2,4%
    2024
    2,4%
    2025
    2,4%
    Indicators
    Net immigration
    Q4 2023
    22‘000
    Q1 2024
    24‘000
    Q2 2024
    22‘000
    2023
    95‘000
    2024
    85‘000
    2025
    75‘000
    Indicators
    EUR/CHF exchange rate
    Q4 2023
    0,94
    Q1 2024
    0,97
    Q2 2024
    0,95
    2023
    0,97
    2024
    0,94
    2025
    0,91

    Source: Bloomberg, Allfunds Tech Solutions, BfS

  • This document and the information and statements it contains are for information purposes only and do not constitute either an invitation to tender, a solicitation, an offer or a recommendation to buy the related products. The customer or third parties are responsible for their own actions and bear sole responsibility for compliance with legal and regulatory provisions and guidelines. PostFinance has used sources considered reliable and credible. However, PostFinance cannot guarantee that this information is correct, accurate, reliable, up to date or complete and excludes any liability to the extent permitted by law. Information on interest rates and prices is up to date, but the actual development may deviate from these forecasts at any time. The content of this document is based on various assumptions. This means that the information and opinions are not a fixed basis for your financing decision. We recommend consulting an expert before making decisions.

    Full or partial reproduction is not permitted without the prior written consent of PostFinance.

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