Current economic outlook

Data valid as at: 25 March 2024
Editorial deadline: 26 March 2024

On 21 March 2024, the Swiss National Bank (SNB) decided to cut its policy rate from 1.75 to 1.5 percent. This means the SNB is the first western central bank to relax its monetary policy conditions after the sharp rise in inflation over recent years. The SNB cut interest rates somewhat earlier than most market participants had expected, but the move doesn’t really come as a surprise in view of the relatively weak domestic economy. A further interest rate cut can even be expected over the course of this year.

Swiss inflation has weakened significantly of late and, at 1.2 percent, is now back within the SNB’s target range. In addition, the Swiss economy has barely grown for six quarters, making another rise in inflation unlikely. The cut in interest rates also raises hopes that the Swiss franc will weaken again after its sharp increase towards the end of 2023. This may boost the domestic export sector and, in turn, the economy.

The policy rate cut is currently having little effect on long-term mortgages. This is essentially due to the fact that long-term interest rates in Switzerland were already at a very low level before the interest rate cut and lie well below short-term interest rates. With a yield to maturity of 0.6 percent on 10-year Swiss government bonds, an increase – despite the fall in the short-term interest level – cannot be ruled out.

Interest rate forecast for PostFinance mortgages

No significant changes to mortgage rates are expected over the coming months. In view of low inflation and the weak economy, the SNB may cut interest rates again, leading to a lower Saron rate. However, this move would probably only benefit long-term mortgage rates to a limited extent. Capital market interest rates are currently already well below money market rates as well as below the rate of inflation, which isn’t sustainable long-term. We actually anticipate that interest rates on longer-term fixed-rate mortgages will go up again over the medium term.

Development of mortgage rates in Switzerland

With the relaxation of monetary policy after the global financial crisis, both the short-term Saron rate as well as medium and long-term mortgage rates have fallen. It was not until the SNB tightened its monetary policy again in response to the sharp rise in inflation during the COVID-19 pandemic that the level of interest rates rose significantly again. In March 2024, the SNB has now cut its policy rate again for the first time. This and further relaxation measures were already expected on the capital market. As a result, interest rates on fixed-rate mortgages have fallen sharply over the past six months.

A Saron or fixed-rate mortgage

The SNB’s latest decision makes short-term money market financing solutions, such as Saron mortgages, less expensive again. According to the PF attractiveness index, medium-term, fixed-rate mortgages are currently even more attractive than Saron mortgages. However, this situation could change again over the coming years. On one hand, there is a risk of the financing costs of fixed-rate mortgages rising again due to upward pressure on long-term interest rates. Further policy rate cuts would also make Saron mortgages even more attractive.

Interest rate forecast for download