Interest rates for short- and medium-term mortgages in Switzerland have declined once again, reflecting expectations of further reductions by the Swiss National Bank (SNB). This trend has notably impacted shorter-term mortgages more significantly, resulting in a steeper yield curve, according to findings from the financial comparison portal moneyland.ch.
The latest data from the site indicates that fixed mortgage rates for shorter-term durations are currently at their lowest in over three years. Specifically, five-year fixed mortgages are now quoted at an interest rate of 1.25%, while two-year offerings are even lower, at 1.12%. In contrast, the decline in rates for long-term fixed mortgages has been less pronounced since June 2024, contributing to a clear steepening of the yield curve compared to the previous year.
Since March of this year, there has been an overall downward trend in mortgage rates. To provide context, five-year fixed mortgages were averaging 2.33% a year ago, a decline of over one percentage point. Similarly, two-year fixed mortgage rates witnessed a significant drop, recorded at 2.31% at the outset of June 2024—more than double the current levels.
While short-term rates have plummeted, the rates on ten-year fixed mortgages have not declined as dramatically. Currently, these longer-term rates stand at 1.62%, still considerably higher than at the beginning of the year and compared to levels seen in early 2022. This disparity has resulted in a noticeable widening of the interest rate differential between long-term and short-term fixed mortgages, further accentuating the steepness of the current yield curve.
According to Felix Oeschger, a mortgage expert at moneyland.ch, the anticipated possibility of the SNB reducing its base interest rate to zero or potentially into negative territory has heavier implications for short-term fixed mortgage rates than for their long-term counterparts. Market expectations have already incorporated the likelihood of a further rate cut by the SNB into the fixed mortgage rates. Should the central bank move to lower the benchmark interest rate significantly below zero in coming adjustments, further declines in mortgage rates can be anticipated.
The price index data for May suggests that there is currently no hindrance to additional monetary easing measures from the central bank. Notably, consumer inflation has edged slightly negative, registering at just 0.1% compared to the same month last year. This backdrop of low inflation could provide the SNB with the leeway to implement more aggressive rate cuts in the near future.
In the larger economic landscape, these developments in mortgage rates have implications not only for potential homebuyers but also for the broader real estate market. Lower borrowing costs can stimulate demand for housing, potentially supporting price increases in a market that has shown signs of cooling. Conversely, if long-term rates remain resistant to declines, this may complicate the refinancing decisions for current homeowners seeking to benefit from lower rates.
As the financial environment evolves, stakeholders—including prospective buyers, current homeowners, and real estate investors—will need to closely monitor policy signals from the SNB and the corresponding influence on mortgage costs. The interplay of these dynamics will undoubtedly influence market behavior and consumer confidence in the housing sector as Switzerland navigates its monetary policy amidst fluctuating economic indicators.
With expectations of continued adjustments by the SNB, the mortgage landscape in Switzerland will remain in flux, necessitating careful assessment and responsiveness from those involved in real estate transactions, financial decisions, and long-term investment strategies.