Interest rate forecast for mortgages

Current economic outlook

Status as at: 20.03.2025
Editorial deadline: 20.03.2025

The Swiss economy has performed well lately. While growth is still below average, this is mainly because companies remain very cautious in terms of their investment decisions, and because individual sectors such as the financial sector, trade and some branches of manufacturing are still in a downturn. However, the economy as a whole appears to have bottomed out.

The most positive development is that domestic demand  Domestic demand refers to the demand for goods and services within a country. Strong domestic demand typically supports the economy, while weak domestic demand indicates a slowdown. has regained significant momentum in recent months, with consumer spending among the Swiss public growing solidly again and construction investment also picking up well. This is likely due in part to the initial effects of the substantial policy rate cuts  Policy rates are interest rates set by central banks and are key monetary policy instruments. Policy rates determine the interest rate at which commercial banks can borrow liquidity from central banks. As a result, most short-term interest rates in an economy fluctuate with policy rates. made by the Swiss National Bank (SNB) last year.

Despite the economic  The economy refers to a country’s current economic situation and reflects changes and fluctuations in economic activity. Sooner or later, upturns are followed by downturns, which is known as an economic cycle. A strong economy means good economic performance and vice versa. recovery, however, we have to assume that inflationary pressure  Inflation is the sustained rise in the general price level for goods and services in an economy over a particular period of time. When the price level rises, the purchasing power of money falls, i.e. fewer goods and services can be bought with the same amount of money as before. will continue to weaken in the coming months. Rental prices, a key driver of inflation in recent years, have risen only slightly in recent months, and even look set to fall again for many tenants, given the reduction in the reference interest rate The mortgage reference interest rate is published quarterly by the Federal Office for Housing (FOH) and serves as the basis for rent adjustments in existing tenancies. The reference interest rate is adjusted in line with the development of the mortgage interest rate. It is based on the average mortgage interest rate offered by banks and is rounded to the nearest quarter percent.. Import prices are also still well below the previous year’s level. And given the recent sharp rise in uncertainty in the international economic and financial system, there is little prospect of any weakening of the Swiss franc, whose strength is putting additional downward pressure on import prices. Against this backdrop, a further reduction in the SNB’s policy rate cannot be ruled out. 

Interest rate forecast for mortgages from PostFinance

Interest rates on Swiss mortgages are likely to vary depending on the financing term. For short-term money market financing, a further slight decline in financing conditions is to be expected due to the continued pressure on the SNB to reduce policy rates again in an effort to counter the appreciation of the Swiss franc. However, we do not anticipate this reduction at the next monetary policy assessment on 19 June 2025, and expect it instead next year. Long-term fixed-rate mortgages, on the other hand, are likely to stagnate for the time being and trend slightly upwards again in the long term in response to the expected normalization of Swiss capital market interest rates Capital market interest rates have a term of over one year They play a decisive role in the cost of long-term financing..

Development of mortgage rates in Switzerland

In 2022, interest rates on fixed-rate mortgages rose to just over 3 percent as a result of monetary policy measures to tackle high inflation. However, since the monetary policy turnaround last year, they have once again been trending downwards. But this trend was recently interrupted. As capital market interest rates normalize, we even consider a further increase to be likely, albeit it slight. For the 3-month SARON, by contrast, we expect a further decline towards zero over the next twelve months. At present, however, we consider it unlikely that there will be any return to the negative interest rates seen between 2015 and the beginning of 2022.

A Saron or fixed-rate mortgage

The PostFinance fixed-rate mortgage attractiveness index is falling appreciably, indicating that fixed-rate mortgages are now roughly as attractive as Saron mortgages. This is primarily due to the further policy rate cut and significant increase in long-term capital market interest rates in the past quarter. As we assume that the upward trend in capital market interest rates will continue for some time and that the SNB will ease its monetary policy once more over the next twelve months, short-term money market financing could become even more attractive compared to fixed-rate mortgages.

Interest rate forecast for download