Are mortgage interest rates already over?

Significant relaxation in mortgage interest rates. This year they only knew one direction – up. While this development makes savings more enjoyable than ever, it turns into a potential nightmare for homeowners who need to renew their mortgages. Depending on the term and type of mortgage, there was even a risk of losing your home.

But that seems to be over now. Medium and long-term housing loan interest rates have been falling again for about a month. And this is pretty fast. Blick explains how interest rates have evolved and, backed by experts, dares to take a look at the near future.

Mortgage interest development 2022

At the beginning of the year, the average interest rate for a ten-year mortgage was 1.25%. It rose to 3.25 percent by mid-October, according to Comparis. According to the online comparison portal, you currently pay an average of 2.73 percent interest on such a mortgage.

The situation is similar for short-term mortgages with a maturity of 5 years. Here you paid 1 percent interest at the beginning of the year. By October they had nearly tripled. In other words, the cost of buying a home on a short-term mortgage is now nearly triple what it was at the beginning of the year. According to the comparison service, you currently pay an average of 2.4 percent interest on such a mortgage.

The situation is somewhat different with Saronic mortgages. These are based solely on the SNB’s underlying interest rate and will therefore continue to increase in the near future. The Central Bank announced additional interest rate hikes for December. Saron interest rates have risen to 1.18 percent from 0.87 percent since the start of the year, according to Comparis.

Why are mortgage rates falling?

Interest rates have always been a reflection of global economic development. As the first half of the year was heavily hit by high inflation, many national banks felt compelled to raise interest rates. In the process, money in the capital market became more expensive and therefore mortgage interest rates rose. High interest rates therefore also slow down economic growth.

Expectations on this issue have deteriorated so much in recent weeks that there is even talk of an impending recession. These gloomy prospects are now causing interest rates to fall again. Because in the economic crisis, the need for credit falls, demand falls and interest rates fall.

a look into the future

Not all mortgage interest rates evolve in the same way. Moneypark CEO Martin Tschopp assumes that “at least medium and long-term mortgage rates will stabilize at their current level.” These are mortgages with a maturity of at least ten years.

The situation is slightly different for short-term mortgages with a maturity of less than ten years. Just like with Saron mortgages, Moneypark experts assume that interest rates will rise slightly in the near future. One reason for this is the interest rate increase already announced by Federal Reserve chief Thomas Jordan.

Therefore, it would be premature to talk about a trend reversal. Martin Tschopp says: “Further development is extremely uncertain.” This is due to the large number of overlapping crises. High inflation in the EU and the USA, the war in Ukraine, the energy crisis and Corona also have an impact. Therefore, a clear prognosis is impossible.