Housing loan interest rates have been rising steadily for months. This and consistently high property prices mean that many people are no longer considering buying their own home.
Those who still had the opportunity to buy a house eventually chose a Saronic mortgage. These were significantly cheaper than fixed-rate mortgages this year. The latter is rarely doubled. Interest rate forecasts were also quite optimistic.
In the meantime, however, the Swiss National Bank (SNB) raised the key interest rate to positive values, so there was a resurgence in Saron interest rates. Or to put it another way: Saron loses its price advantage over fixed-rate mortgages.
Why is Saron risky?
A Saron mortgage consists of a Saron reference interest rate and an agreed-upon fixed margin. The interest rate is disclosed retrospectively only at the end of the interest period. Therefore, the interest rate is variable. If this goes down, so do the costs for the interest recipient. If they rise, the borrower has to pay more.
This means that due to rising Saronic interest rates, the person will have to improve their living situation. But most cannot. Real estate expert Donato Scognamiglio (52) says in an interview with “Cash”: “A Saron mortgage currently has an interest rate of around 1.8 percent, and if the SNB raises interest rates further, Saron will also be expensive. Many of them are going back to fixed mortgages. It’s relatively easy to imagine what you want.”
A fixed rate mortgage offers security over the entire term. Many homeowners currently still have ongoing mortgage contracts at low interest rates. Hence, a rise in interest only becomes a problem when they have to renew their mortgages with higher maturities.
Saronic mortgages are therefore tantamount to speculative business. It’s something that only people who can afford to financially afford dramatically rising interest rates should really be able to afford. This raises the question of whether banks were too careless in issuing many Saron mortgages. Finma complained that loans were too often given to people with insufficient income.
How high will mortgage rates go?
Whether Saron or Fest: Most experts assume that interest rates will continue to rise. Inflation is persistently high in many places, so inflation may continue in Switzerland. This will likely encourage the SNB to raise interest rates further.
Scognamiglio: “I can predict that Saron mortgages will cost more than 2.5 percent and flat rate mortgages more than 3.5 percent next year.” The result will be that less and less can afford a house. And immigration to the (cheaper) country will continue to increase.