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The cost of a mortgage, measured by the Mortgage.ch interest rate index, has more than doubled since the beginning of 2022, from 1.07 percent to 2.39 percent. For an 800,000 franc mortgage, you would pay 10,560 francs more per year, or 880 francs more per month. The five interest rate increases by the Swiss National Bank (SNB) since spring 2022 have had an impact on homeowners’ financing costs.
Even if the SNB does not raise interest rates further, this does not mean that interest rates will necessarily fall in the short term. Given global interest rate trends characterized by rising long-term interest rates and bond yields, long-term reference interest rates in Switzerland and therefore long-term fixed mortgage interest rates may also continue to rise.
But even in an environment where interest rates are stable or rising, there are proven strategies to lower credit costs and thus put less of a burden on your wallet in the years to come.
one
Review existing loan agreements and monitor the market
You should check your existing loan agreements and pay attention to loan maturity dates. “Focus on loans that will mature in the next 18 months,” advises Giampiero Brundia, mortgage expert and managing director of Oxifina.
It is extremely useful to stay informed about developments in the mortgage market when preparing to sign a contract. Interest rates can change daily and it may be worth waiting for the right time to renegotiate or refinance your mortgage. “During periods of rising interest rates, it is vital to be proactive to keep mortgage costs under control,” adds Brundia.
2
The right mortgage strategy – determine the amount and term
“Only those who know which mortgage strategy is right for their personal situation can really compare,” Florian Schubiger of Kredite.ch tells Cash.ch. Mortgage strategy specifically includes the mortgage amount and model. Every mortgage borrower should be clear about “which direction” he should go before taking out a mortgage, depending on his financial possibilities and willingness to take risks.
With the mortgage strategy, you create a good starting position so that you can eventually make transparent comparisons. You should never enter into a conversation with a banker without learning more. It is not uncommon for them to have sales targets for certain maturities or to be asked to only close certain transactions at a relatively high margin.
3
Negotiate with lenders and refinance loans
It never hurts to talk to your lender and try to negotiate better terms. During periods of rising interest rates, lenders may be willing to offer lower interest rates to retain customers.
“If interest rates rise, it may be worth considering refinancing your loans,” says Brundia. If you have a good credit score, you can benefit from lower interest rates. You should compare offers from different lenders to find the best offer.
Interest rate differences of up to 0.7 percent per year are not uncommon. A person who takes 0.3 percent of a 1 million franc mortgage will save 30,000 francs in ten years.
4
Improve rating
To get the best interest rates, you should optimize your personal credit score. Affordability, loan-to-value ratio and mortgage amount are the main factors that affect the interest rate. Therefore, it is advisable to ask your bank advisor specifically what measures you can take to expect better interest rates. For example, promising 3a credit is a good way to improve your score.
«Transparent communication with the bank advisor is recommended. “Many people become more comfortable with the interest rate when they realize they are not the only ones bidding and other providers are also in the race,” says Schubiger. As it is known, competition stimulates the market and this causes interest rates to decrease. However, not every credit institution uses the same criteria when determining interest rates. Therefore, disclosure regarding rating optimization must be made individually for each lender.
5
Compare all providers
It is important to compare not only banks, but also pension funds, insurance companies and investment foundations. “Experience has shown that banks are particularly competitive with lower ratings and shorter maturities, while other providers often offer good interest rates with good ratings and longer maturities,” says Schubiger. But this is just a general rule.
As always when making comparisons, it is important not to compare apples to pears. The most important thing is that the tender dates are exactly the same. Offers with different issuance dates cannot be compared because general interest rates fluctuate so much even in the short term. The same applies to the mortgage amount or depreciation.
“Depending on the provider, fees may apply, for example for credit checks, results and model changes,” Moneyland analyst Felix Oeschger warns to Cash.ch. This can quickly reach several hundred francs, or even more. If possible, you should choose a provider that does not charge any fees.
6
Negotiate properly
It is unlikely that the best possible interest rate will be offered directly through the branch channel without bargaining. It is part of the banks’ business model to begin negotiations with an interest rate that still has the potential to improve. “If you’re not aware of this, you’ve already lost,” Schubiger warns. At times it almost looks like an arcade.
When negotiating, it’s important for everyone to know that you’re still examining other offers. On the one hand, this is fair for mortgage bidders. On the other hand, it also ensures that the initial interest rate offer is more likely to be slightly better than if the advisor believed he or she was the only one making the offer.
It is also important to allow enough time when negotiating. You must have the binding interest rates stated at the beginning of the process. Non-binding interest rate indicators are of no use; these can always be adjusted later. If you have a binding interest rate, you should always know how long it is valid for.
7
Check offers online
“I think it is very important today that every offer coming from a bank branch is cross-checked online,” says Schubiger. If the interest rate determined this way is significantly lower than the best available offer, you should “play around” with the process and see what kind of interest rate you end up with. If the difference is very large (usually between 0.2 and 0.5 percentage points), you may also consider an online degree. Or use the information you obtain this way to contact your bank advisor and ask for lower interest rates.
Since there is healthy competition and transparency between providers on online platforms, interest rates are often better than other sales channels. In addition, insurance companies, pension funds and investment foundations are actively represented in the sales channel of mortgage platforms. And some of these offers can only be completed through this channel.
What is advantageous for customers is that the interest rates displayed in the online channel represent the interest rates available for financing in real time. This means you can instantly see what will happen to interest rates if, for example, you change the mortgage amount or provide additional security. Therefore, “play and try” in the online channel is desirable and effective.
8.
Diversify and amortize loans
“Diversifying your real estate loans can help spread risk and make the loan portfolio less vulnerable to rising interest rates,” advises Brundia. The disadvantage of this financing method is that you are overly dependent on the lender. If your financial situation allows it, you should also pay off the loans. Depending on the model and contract, voluntary depreciation may be possible. You should ask your provider about this. And more importantly: the lower your mortgage debt, the less mortgage interest you have to pay and the better your credit score. And the latter is especially useful when the mortgage needs to be renewed.
Source :Blick
I’m Tim David and I work as an author for 24 Instant News, covering the Market section. With a Bachelor’s Degree in Journalism, my mission is to provide accurate, timely and insightful news coverage that helps our readers stay informed about the latest trends in the market. My writing style is focused on making complex economic topics easy to understand for everyone.
