In February, the average interest rate on a ten-year fixed-rate mortgage was 1.21 percent, the highest it has been in two years. But the steep upward trend that began after the turn of the year seems to have stopped. Since the end of February, the “ten-year-olds” have been around the 1.2 percent mark on average. This is particularly related to the development of the yields on longer-term bonds of the Swiss Confederation, which have also been trending sideways since the end of February.
Development of interest rates for mortgages with a two-year (red), ten-year (dark green) and fifteen-year (turquoise) term (average: yellow). Graphic: Hypotheke.ch.
Between the beginning of the year and the end of February, the yield on Swiss government bonds with a ten-year term rose sharply from -0.525 percent to -0.229 percent. Not much has changed since then. The “Confederation” is currently yielding -0.2 percent.
By contrast, the swap rates rose somewhat more sharply at the end of April. These reflect the refinancing rate for banks on the international capital markets. Both the bond and swap markets have a direct influence on price formation on the mortgage market.
Graphic: Moneypark.ch, Quelle: Refinitiv
Mortgage rates: will the sideways movement continue?
“I assume that mortgage interest rates will continue to develop sideways over the next two to three years,” Giampiero Brundia from the consulting firm Oxifina told cash.ch. This applies in particular to short-term mortgages with a term of up to three years. There the level will practically not change. “In the longer-term area, ie with five-, ten- or fifteen-year mortgages, I also see a sideways movement. However, with a slight upward trend,” says Brundia. Specifically, the mortgage expert expects surcharges of 0.1 to 0.2 percent.
For the comparison service Moneypark, the concern about sharply rising mortgage interest rates is “currently not appropriate”. In their latest market analysis from May, the authors find that mortgage providers have not reacted to the rise in swap rates. The rise in interest rates on the capital market is not sustainable, but rather “should be viewed as a slight up and down, as we saw in March”, according to the Moneypark authors.
Monetary policy and competition keep mortgage rate increases in check
Discussions about possible interest rate hikes intensified last week when Treasury Secretary Janet Yellen, intentionally or unintentionally, brought up rising interest rates during an online discussion to prevent “the economy from overheating”. However, the majority of experts still do not assume that the central banks will change their interest rate policy before 2023.
Another point that should keep mortgage rates in check in the medium term is the still high level of competition among mortgage providers. “The competition is there, the competition is massive,” says Brundia. This will continue to ensure very attractive offers on the mortgage market. For some time now, the “price war” has been intensifying among providers. This is always ensured by new players who come onto the market.
Which mortgage?
Short-term mortgage rates are likely to stagnate further, while experts see at least minimal upside potential in the longer-term area. What term should mortgage borrowers now choose? When it comes to this question, everyone has to check for themselves whether their personal hypo strategy matches the real estate strategy, says Brundia. “If I want to keep my property for many years to come, the current interest rate level is extremely attractive for taking out a long-term mortgage.”
It still applies: Historically, mortgages are still as cheap as they were before. It therefore makes sense to secure this low interest rate for the long term, according to Brundia. “Of course, it is different if I decide to sell the property in a few years. Then the even cheaper, short-term mortgages offer themselves.”
What interest rates can customers realistically claim from the provider? “We are currently taking out ten-year mortgages from 0.68 percent for our customers,” reveals Brundia. “With short-term mortgages, interest rates from 0.3 percent are currently possible.”
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