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Despite supply chain problems, world trade exports have recently shown positive growth. The pre-crisis level is clearly exceeded. In the USA, private consumption continues to be above pre-crisis levels. In addition, the situation on the labor market has improved significantly. The economy in Switzerland is also continuing to do well and is ensuring a significantly higher GDP than before Corona. The new virus variant Omikron has taken over the world in the last few weeks and is endangering further economic development. Capital market rates rose again slightly over all maturities. The benchmark rates for fixed-rate mortgages are also slightly higher than in the previous month. The annual average of the guideline rate for the ten-year term rose again in the past year for the first time since 2018. However, the top conditions for particularly attractive financing with low risks have remained low. The two-year term has never been cheaper than it is now. The previous low of 0.38 percent from February 2020 is undercut by 13 basis points.
Macroeconomic situation
World trade: positive development despite supply chain problems
According to the analysis of navigation and shipping data by the International Monetary Fund, exports from Asia, the euro countries and the USA have recently recovered despite the supply chain problems and are currently only around 5 percent below the pre-crisis level. However, due to Omikron there is a risk of major restrictions.
Global air traffic has increased significantly compared to 2020, especially in the summer months. Compared to the pre-crisis level, the number of flight movements is currently only around 20 percent lower, but Omikron is endangering the recovery.
Switzerland: Economic output continues to grow
Since December 20, 2021, a 2G rule, a home office requirement and stricter requirements have been in effect throughout Switzerland. Real-time data on mobility behavior are now showing significant declines in terms of public transport passenger frequencies. In contrast, shopping behavior has barely decreased.
the Real time indicator on the macroeconomic development of the State Secretariat for Economic Affairs (Seco) shows that the Swiss gross domestic product (GDP) increased strongly into December and is currently around 2.6 percent above the pre-crisis level.
Omikron threatens recovery in 2022
With the advent of Omikron, the economic outlook has deteriorated again. According to initial estimates by BAK Economics, Omikron could more than halve economic growth in 2022 compared to previous forecasts (from 3% to 1.3% GDP growth). However, it remains to be seen how Omikron will actually affect the pandemic.
If the corona measures were to be massively tightened, this would inevitably have a negative impact on economic development. In Austria, for example, it has been calculated that the fourth lockdown cost around € 3 billion per month.
Capital market rates remain extremely volatile
The US Federal Reserve (FED) announced in December that it expected three rate hikes in 2022. Due to the strong correlation with interest rates in the euro area and the highest inflation rate for decades, the pressure to increase interest rates could also increase in Europe and thus also in Switzerland.
In the past few weeks, this has again led to sharply fluctuating capital market rates. The benchmark rates for mortgages barely changed in December, but the top conditions fell again and reached their lows for the year.
Development of interest rates
Interest rate reversal for the ten-year term
The guideline rates (average of the shop window rates of more than 150 providers) for the short and long-term terms made a diver in December, but at the end of December they were quoted slightly above the previous month. The annual average of the ten-year term has risen again for the first time since 2018 and is at 1.22 percent, five basis points higher than in 2020. The annual average of the two- and five-year term increased by seven and five years in 2021, respectively. three basis points after.
Pension funds on average. Status: December 31, 2021
Two-year term for the first time for 0.25 percent
The interest rates of the cheapest providers fell again in December and reached their lowest values for the year. The top conditions for a ten-year term were last lower in August 2020 and for the five-year term in March 2020. The two-year term has never been cheaper than it is now. The previous low of 0.38 percent from February 2020 is undercut by 13 basis points. The range between the cheapest and most expensive provider has increased to 93 basis points over the ten-year term.
Pension funds on average. Status: December 31, 2021
Capital market rates rose towards the end of the year
Capital market rates initially fell a few basis points in December and then rose significantly again towards the end of the year. They are quoting three (10 years) to nine (2 years) basis points higher than the previous month. The high volatility is likely to continue over the next few weeks. Two influences are central here, but very difficult to assess: The speed of interest rate hikes in the USA and the further development of the global economy or the impact of the pandemic on it.
Zinsprognose
Will mortgage interest rates rise substantially in 2022?
The average benchmark rate for the ten-year term rose again in the past year for the first time since 2018. It is currently around 10 basis points above the previous year’s level. Assuming that the Omikron wave will peak in the next few weeks and that this will slow down the global economic recovery, we do not expect any significant rise in interest rates for the time being, but the capital markets will continue to be very volatile. As a result, we see mortgage interest rates in the next few weeks at a similar level as they are now. Because low risks are particularly sought after, the range between the top interest rates and the benchmark rates is likely to remain extremely high. From today’s perspective, it appears that the pandemic can be overcome from the second quarter onwards. If inflation also remains high, interest rate hikes in the USA could bring the long-awaited turnaround in interest rates with substantially higher mortgage interest rates. However, this scenario is fraught with uncertainties.
Top offers remain very attractive – how much longer?
Contrary to our expectations, the top offers reached new annual lows towards the end of the year. In the case of short-term terms, the further reduction potential is very low. The interest rates for medium and long-term maturities could still fall slightly if capital market rates fall, but at 0.8 percent they are currently extremely attractive for 15 years.
recommendations
- The interest rate level is likely to remain very volatile in the coming months. Accordingly, it is important to deal with the upcoming extension of a mortgage at an early stage so that you can take advantage of opportunities.
- With a broad comparison of providers, you can currently enjoy very attractive conditions – and this across all terms. The two-year mortgage is cheaper than ever and the fifteen-year mortgage is available for less than 1.0 percent.
- Taking out mortgage financing through a mortgage specialist like MoneyPark is worthwhile for various reasons: First, the potential for savings is massive – depending on the number of thousands of francs per year. And secondly, the intermediary takes on time-consuming dossier submissions and tedious negotiations with the individual mortgage partners.
The mortgage rate estimate for January 2022 in PDF format you’ll find here.
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