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MONEY

What impact will latest bank interest rate cut have on Swiss consumers?

In an unexpected move, the Swiss National Bank cut the interest rate by quarter point. How will this move impact consumers?

Published: 21 March 2024 12:27 CET
What impact will latest bank interest rate cut have on Swiss consumers?
If you fancy a new car, now may be a good time to buy it. Image by Toby Parsons from Pixabay

After raising its rate to 1.75 percent in 2022 and maintaining it at this level until now, the central bank (SNB) lowered it back to 1.50 percent on Thursday.

Contrary to the situation following Russia’s invasion of Ukraine, which affected global economy and Switzerland’s usually low inflation spiked to 3.4 percent, the new reduction of interest rate “has been made possible because the fight against inflation over the past two and a half years has been effective,” the bank said.

“For some months now, inflation has been back below 2 percent, and thus in the range the SNB equates with price stability.”

The bank’s forecasts indicate that “inflation is also likely to remain in this range over the next few years.”

What does this move mean for Switzerland’s consumers?

It could have both positive and (slightly) negative impact on household finances.

Much depends on whether you are planning to spend your money or save it.

If you are looking to buy big-ticket items that are usually purchased with credit — like homes or vehicles, for instance — then you are in luck.

That’s because when a central bank lowers its interest rates, loans become cheaper. So if you qualify for a loan, this is a good time to apply for one.

READ ALSO: Does having a good credit score matter in Switzerland? 

In terms of mortgages, they are likely to become cheaper as well when interest rates drop.

This, however, is only the case for new mortgages or ones that are due for renewal.

If you have a fixed-rate mortgage which is not up for renewal, then you will not be able to benefit from lower interest rates.

What about the money you have in the bank?

That’s where the news is not as good.

When the SNB raised its rates from 1.50 to 1.75 percent in December 2022, a number of Swiss banks offered a slightly higher yield on certain types of savings and investments. 

It is therefore logical that when the opposite happens — that is, when interest rates dwindle — so do returns on your assets.

At this point, however, it is not yet sure when this ‘drop’ in yields will happen, or by how much.

What, if any, impact will this move have on rents?

With the interest rate turnaround — and given a positive forecast on the inflation front — there will probably be no further hike in the reference interest rate in the immediate future.

And because the central bank lowered the key interest rate earlier than expected, there could perhaps be rent reductions later this year — but that remains to be seen.

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For members

INHERITANCE

Inheritance in Switzerland: Which country’s laws should dual nationals follow?

Switzerland has well-defined rules for inheritance and succession rights. But do dual nationals have some leeway in choosing which country's laws to follow?

Published: 13 May 2024 12:20 CEST
Inheritance in Switzerland: Which country's laws should dual nationals follow?

First, let’s look at what Swiss inheritance / succession legislation says.

Who gets what depends on whether you have a will or not when you die (the latter’s legal term is ‘intestate.’)

If you don’t have a will, your estate will be divvied up among your legal heirs: spouse or registered partner and children.

Typically, the spouse gets half of your assets and the children the other half, to be divided equally among them.

In case you have no kids, your parents or even grandparents could inherit from you.

Next in the statuary succession rights  are siblings.

If, however, you have no living relatives whatsoever, your estate will go to the canton or commune of your last residence.

What if you do have a will?

It will give you some, though not total, flexibility in who you want to leave your assets to — and how much. 

For instance, you can choose who your heirs will be and how your estate should be distributed among them.

You can decide to give more than a half to your spouse and less to the children, or vice-versa.

However, your legal heirs — that is, spouse and children — cannot be cut out of your will altogether.

Note that this law applies to Swiss citizens only. If you are a foreign national living in Switzerland, your succession is normally governed by the laws of your country.

However, if you a long-term resident and plan to remain here permanently — for instance, if you have a C permit — you can choose the Swiss law instead of the foreign one to apply upon your death. But you must state your preference in your will.

If you die intestate, then the Swiss legislation will kick in, as it will be deemed the law of your last place of residence.

READ ALSO: 7 things you need to know about Swiss inheritance law

What about dual nationals?

At present, those who have Swiss citizenship in addition to a foreign one, must abide by Switzerland’s inheritance law only.

That’s because, for all intents and purposes (including legal ones), they are considered to be Swiss citizens only.

However, this will soon change.

On December 22nd, 2023, the parliament adopted the Federal Act on International Private Law (PILA), which will give dual nationals in Switzerland the option of basing their succession on the laws of  their ‘other’ country of citizenship.

However, in doing so, dual nationals can’t derogate from Swiss statuary succession rules — that is, they won’t be able to exclude spouses and children from inheriting their part of the estate.

The new legislation is expected to come into force on January 1st, 2025.

READ ALSO: What you should know about dying in Switzerland

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