Raiffeisen CEO Heinz Huber says what’s happening in the real estate market: Do you prefer Saron or fixed-rate mortgages, Mr. Huber?

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The sky over Zurich Airport is cloudy. Inside, Raiffeisen shines in the sophisticated office environment of the “Circle” at Zurich Airport. Last year the cooperative bank earned more money than ever before in its history: 1.39 billion francs. The bank earned advances of more than half a billion francs from interest business alone. It expanded its market share, did well with interest rates and established itself as the clear No. 2 in the financial center behind major bank UBS.

Blick: Mr. Huber, will you be as happy as a cockroach with this result?
Heinz Huber: Raiffeisen is a down-to-earth person. So even though we had a great year, we don’t hit the road. We no longer expect such a good result for this financial year. The interest margin has already narrowed again. We’re just modest, almost a little modest as I like to call it.

But before that the interest margin rose sharply. Why don’t they pass their profits on to customers, for example through better savings interest rates?
We increased interest rates 4 times last year. We will convey the increased interest rates to our customers with a slight delay. Also, when interest rates were negative, we were charging almost no negative interest rates to private clients.

Most customers would not accept this and would leave.
This is already the case. What happens if you, as a saver, have to pay negative interest rates? At some point they say it would actually be cheaper for me if I took the money from the bank and put it under the bed. This should not happen under any circumstances.

The anniversary of Credit Suisse’s death is approaching. To what extent did Raiffeisen benefit from this?
We gained new customers, both individual and corporate. But even before the end of CS, one in three companies in Switzerland was affiliated with Raiffeisen. And of the 55,000 new private customers, only a small fraction switched from CS to us.

The Central Bank currently keeps inflation under control. When will interest rates fall again?
We expect the first interest rate cuts to be made in the autumn, possibly even in early June. It is important that the Federal Reserve does not cut interest rates too early so that there is still some leeway.

On the other hand, falling interest rates will weaken the franc and therefore help industry.
The Central Bank will closely examine what other central banks are doing. The upward pressure on the franc should not increase. The export sector and all its suppliers are already feeling the decline in growth in the global economy. Order backlog and incoming orders are particularly important topics when talking to corporate customers.

What about the overall economy?
We expect 0.8 percent growth this year. It’s not exciting, but it’s not a recession either.

How solid is the Swiss real estate market?
The net loan to value ratio of our residential real estate portfolio is 59 percent. I think this is very solid. When granting a mortgage, we calculate an imputed interest rate of 5 percent. Even though real interest costs are much lower, we advise our customers not to spend this money, but to use it to pay off their loans.

Who can afford to buy a house these days?
Many people today are struggling to meet their capital requirements. It concerns me that some of the population can no longer afford to own their own home. This is an unhealthy development.

Interest rates are likely to fall soon. What should I do if I need to get a new mortgage (Saron or fixed rate mortgage)?
This is highly individual and depends on your personal risk appetite. We always recommend a mix of both and different terms…

…is this primarily beneficial to the bank or the customer? I am tied to my bank forever with different terms.
However, you do not face the risk of having to renew everything at once during periods when interest rates are high. Personally, I wouldn’t take that risk.

Will fixed-rate mortgages get cheaper?
Interest rates depend on the market and expectations. Some of the upcoming rate cuts are already priced in. However, mortgage loan interest rates are likely to decrease slightly. For a while there was greater demand for Saron mortgages, but this is changing again. Today, the majority of our customers still use fixed-rate mortgages.

With shorter terms?
Yes, customers are looking for shorter terms. We feel a certain reluctance to make a longer commitment. But I think there’s also a lot of wishful thinking behind that. Especially since interest rates are still very low by historical standards. We won’t be seeing negative interest rates again anytime soon.

Which is more valuable today? rent or buy?
In the short term, “buying” is just as attractive as “renting”. Towards the end of the year, “buying” will probably be more attractive than “renting” again.

Source :Blick