After the US and Israel attacked Iran on February 28th, Swiss petrol prices have risen sharply. But the conflict is impacting mortgage rates in Switzerland as well.
Even though the Swiss National Bank (SNB) is maintaining its key interest rate unchanged – at zero percent – interest rates for mortgages have increased sharply in the past several weeks.
This is what emerges from a new analysis carried out by Comparis consumer platform, which links this hike to war-driven tensions in the financial markets.
After a downward trend at the start of the year, rates rebounded sharply following the escalation of the conflict in Iran.
According to Comparis’ financial expert Dirk Renkert, “the primary drivers are rising geopolitical risks, which are fuelling inflation expectations and leading to higher capital market interest rates.”
What are the mortgage rates in Switzerland right now?
The rate for a two-year fixed-rate mortgage has now reached 1.48 percent, across 30 mortgage providers.
It stood at 1.34 percent as recently as late February, prior to the outbreak of the Middle East conflict.
For five-year terms, the rate rose from 1.51 percent to 1.63 percent, while for 10-year terms, it currently stands at 1.84 percent – up from 1.77 percent at the end of February.
Advertisement
A trend toward flexible and short-term mortgages
Given the current interest rate volatility, particularly concerning fixed-term mortgages, lenders have been favouring the SARON alternative upon renewal, Comparis found.
Unique to Switzerland, SARON (Swiss Average Rate Overnight) is based on a rate that can change daily. Though it can fluctuate considerably, it provides an alternative for borrowers who don’t want to be tied to a fixed-term mortgage.
READ MORE: What is Switzerland’s ‘SARON’ mortgage?
Consequently, the share of SARON mortgages has doubled to 18 percent in recent weeks, Comparis reported.
It also found that, due to the destabilising effect the Middle East conflict has hadon financial markets, the share of mortgages with terms of up to three years (including SARON mortgages) stood at around 27 percent—significantly higher than in the previous quarter (17 percent).
