Is there a danger of the next hypo shock?: Swiss property owners now have to take these interest costs into account

class=”sc-29f61514-0 icZBHN”>

There is no official data on how many homeowners in Switzerland have to renew their mortgages every year. But there are estimates of the amount in francs: Giampiero Brundia, mortgage expert and managing director of Oxifina, assumes that around 170 billion francs of mortgages will come due every year, according to model calculations. About half of that is related to home ownership.

“The biggest challenge is that the majority of mortgage maturities – an estimated 70 to 80 percent – ​​are fixed-rate mortgages,” Brundia tells Cash.ch. Fixed-rate mortgages, which previously charged around 1 percent interest, are now two or three times more expensive to renew. “Many property owners have become accustomed to low financing costs and are finding it difficult to accept the idea of ​​paying much more.” At the same time, “everything” has become expensive due to inflation.

There’s still good news: After vital capital markets rates (SWAP) for fixed-rate mortgages hit a 10-year high in October 2022, interest rates on fixed-rate mortgages have since fallen by half a percent. The mortgage interest rate index, which is dominated by fixed-rate mortgages, has also been in a slightly downward trend since the last interest rate increase by the Swiss National Bank (SNB) in June.

But first the wind will strengthen again: the SNB will likely raise the key interest rate by 0.25 percent at the next meeting to assess the monetary policy situation on September 21, meaning the Saron will rise to just under 2 percent from the end of September this new It should settle and settle at the level. Saron (Overnight Swiss Average Rate) has been the basis for money market mortgages in Switzerland since 2022. Fixed-rate mortgages, on the other hand, will initially increase slightly, up to 0.2 percent, then settle at the new interest rate level and decline over the next 2 to 3 years, according to Brundia.

“Longer fixed-rate mortgage terms were preferred.”

Current “window prices” for five-year Swiss mortgages on well-known comparison platforms start from 2.16 percent; The cheapest offer for mortgages over ten years is 2.22 percent. Other interest rates may also be negotiated depending on income, amount of equity, or property type.

However, interest costs can be significantly higher for mortgage borrowers who do not have great credit. Here Cash.ch explains how to optimize interest costs when negotiating a mortgage.

*Most important conditions only – general information – the actual interest rate may be higher due to various factors. ** Best conditions, reference values, for a new mortgage of 800,000 francs with a property value of 1 million francs in the canton of Zurich.

The current interest rate situation for fixed-rate mortgages is exciting, with 2- and 3-year SWAP being higher than 4- to 10-year SWAP. 15 and 20 years are almost the same price as 2 years. “This encourages longer fixed-rate mortgage terms,” says Brundia.

The reason for this rather specific starting position is uncertainty regarding monetary policy developments. Those looking for money in the capital market are looking for very short-term loans because they do not know how interest rates will develop. For this reason, lenders charge higher interest rates in the short term.

Huge differences in interest margins for Saron mortgages

The lowest margin for the Saron mortgage on comparison platforms is 0.47 percentage points. The lowest interest cost is 2.18 percent, with the Saron interest rate of 1.71 percent based directly on the SNB’s base interest rate.

This level will remain unchanged until the SNB’s next monetary policy review on 21 September. After that, you’ll probably have to pay at least 2.43 percent for a Saron mortgage; That’s much more than the currently cheapest “show price” for a ten-year fixed-rate mortgage.

What’s interesting about Saron mortgages and fixed-rate mortgages is the different interest margins offered by lenders: “A loan auction we conducted this week shows the interest margin on a Saron mortgage is between 0.43 and 0.95 percent,” says Brundia. With a 1,000,000 franc mortgage and a 0.5 percent lower interest rate, 5,000 francs per year in interest costs can be saved.

Large differences in interest rates indicate that competition is still ongoing. The mortgage industry is highly competitive; Both banks and non-bank institutions such as insurance companies and pension funds are fighting for market share. This also means you can get better interest rates from certain lenders with negotiation skills.

Be proactive

It is a fact that the cost of a mortgage is more expensive today than it was two, five or ten years ago. Nothing can be changed about this. However, it is possible to influence whether more or less is paid. The first step is to take a proactive and serious approach to renewing your mortgage. Those facing an interest rate shock due to an expiring or first-time mortgage loan are advised to take the following steps:

1. Embrace interest rate expectations
2. Determine mortgage strategy
3. Preparing credit file
4. Determination of lenders for loan tendering and negotiation
5. Tendering and negotiation

And if you assume the mortgage interest will come back, you will continue to have the mortgage as a Saron mortgage and then switch to a fixed rate mortgage if desired and makes sense.

“If you expect interest rates to continue rising, you should get a fixed-rate mortgage so that the doubling interest rate shock doesn’t turn into a bigger ‘bad’,” says Brundia. Here, Cash.ch lists the common mistakes Swiss property owners should avoid when making a mortgage.

Source : Blick