Europe's news in English

COPY LINK

PROPERTY

Swiss mortgage rates ‘climb drastically’ with more hikes on the way

Due to inflation and Switzerland’s new monetary policy, mortgages are now twice as expensive as they were a year ago.

Published: 26 January 2023 13:21 CET

Swiss mortgage rates 'climb drastically' with more hikes on the way

Higher mortgage rates make home ownership more expensive. Photo by Tierra Mallorca on Unsplash

A bit of bad news for owners, or prospective buyers, of Swiss properties: they will have to pay more than double of 2022 prices for a 10-year fixed rate mortgage, Moneyland consumer platform reported on Wednesday.

“Swiss mortgage index has climbed drastically over the past year,” Moneyland said.

Currently, the average interest rate is 2.54 percent for five-year fixed mortgages and 2.76 percent for 10-year terms. As a comparison, at the beginning of 2022, these rates were 1.01 percent and 1.26 percent, respectively.

“On average, the cost of a ten-year fixed-rate mortgage is around double of what it was at the start of 2022,” according to Moneyland’s CEO Benjamin Manz.

Five-year mortgages are 2.5 times higher than they were in early 2022, he said.

This is not exactly a surprising development, as experts had predicted the hike when Switzerland’s central bank (SNB) raised its key rate sharply last year to fight inflation, which, in turn, caused mortgage rates to go up as well.

The upward trend could continue well into 2023, as the SNB’s chief Thomas Jordan recently said that another hike is likely, further increasing the current interest rate of 1 percent.

READ MORE: Switzerland set for another interest rate hike, central bank chief warns

This means that mortgages will remain “very expensive, and could well climb further as 2023 progresses,” Moneyland said.

If you already have a fixed-rate mortgage, then you are safe from rate increases for the term of your mortgage.

However, for new home buyers, or those with variable-rate mortgages, things may be more problematic.

“It is not excluded that mortgage interest rates will reach 3 to 4 percent next year,” according to Donato Scognamiglio, director of real estate platform Iazi.

READ MORE: What’s the outlook for the Swiss property and rental market in 2023?

Are there any cheaper mortgage options in Switzerland?

These articles could help you find alternatives to traditional models:

Reader question: What is a reverse mortgage in Switzerland, and will it benefit me?

EXPLAINED: What is Switzerland’s ‘SARON’ mortgage?

Member comments

Log in here to leave a comment.

Become a Member to leave a comment.

The Zurich paradox: Why is world's most expensive city also the best to live in?

In the latest quality of life report from the European Commission, Zurich has beat, fair and square, 82 cities across the EU, European Free Trade Association (EFTA) – that is, Norway, Iceland, and Liechtenstein – the United Kingdom, the Western Balkans, and Turkey.

The survey found that majority of Zurich residents are happy with their jobs, public transport, healthcare services, air quality, and their financial situation.

The city also offers the best quality of life for older people and the LGBTQ+ community in all of Europe.

While Zurich is not exactly a stranger to such accolades, having won similar titles before, it has not consistently scored high marks in all surveys.

On the contrary, for several years in a row, including in 2023, Zurich was ranked the world’s most expensive city in the Economist magazine’s Cost of Living index. Once the 2024 figures are released later in the year, it is a safe bet that Zurich will be at, or near, the top again.

This brings up a question of how a city (or a country) can be “best” and “worst” at the same time.

Not a major issue

Every second year, Zurich municipal authorities conduct a survey among the local population about what they like and dislike about the life in their city.

In the last such survey, published in December 2023, city residents mentioned such downsides as shortage of affordable housing and traffic congestion but, interestingly, the notoriously high cost of living was not cited as a huge concern.

One reason may be high wages.

Based on data from the Federal Statistical Office, a median monthly wage in the city is 8,000 francs – about 1,300 francs more than the already high median Swiss salary.

You may argue that the high salaries don’t necessarily compensate for high prices.

However, a new study shows that the purchasing power in Zurich is quite high.

With 57,771 francs of disposable income per capita, Zurich’s purchasing power is among the highest in the country, exceeding the national average of 50,000 francs (which, in itself, is higher than elsewhere).

READ ALSO: Where in Switzerland does your money go further?

Of course, this is the case of the 50 percent of the population that earn upwards of the median wage; for the other half, the quality of life probably isn’t as high.

Assuming, then, that the surveys are carried out mostly among residents with decent salaries, their assessments of life in Zurich will be mostly positive.

The link between wealth and quality of life

Consider this domino effect:

The more people earn and the more income tax they pay (although Zurich’s rate is not Switzerland’s highest), the more money there will be in public coffers to spend on infrastructure, public transport, health services, school system, recreational activities, parks and green spaces, and all the other “perks” that contribute to the city’s quality-of-life ranking.

In other words, good life comes at a price, even though – in Zurich’s case – it is a high one.

Url copied to clipboard!