Current economic outlook

Status as at: 12.12.2024
Editorial deadline: 12.12.2024

Economic development in Switzerland stabilized somewhat in the summer and autumn of this year. It is particularly encouraging that consumption and construction activity have continued to steadily increase and, as a result, the economic sectors geared towards domestic demand were able to recover slightly. However, the Swiss National Bank (SNB) decided to lower its policy rate by 50 basis points to 0.5 percent in December. Furthermore, the SNB has repeatedly indicated in recent months that a further easing of monetary policy in the coming months cannot be ruled out. This shows that the SNB sees a major risk in the appreciation of the Swiss franc and its consequences.

The impact of this can be clearly seen in the Swiss inflation rate, which has fallen sharply over the past year and is still at 0.7 percent. The decline is primarily due to imported goods, whose prices are 2.3 percent below the previous year’s level. In order to prevent a further fall in the inflation rate, the SNB is lowering interest rates and remains prepared to intervene in the foreign exchange market if necessary. This is all the more true, as the main international central banks have begun to ease their monetary policy this year. In particular, the US Federal Reserve (Fed) and possibly also the European Central Bank (ECB) may cut interest rates next year, which could reduce the interest rate differential to the franc, increasing upward pressure on the Swiss currency.

This expectation of substantial monetary easing is also likely to be a key reason why 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. have fallen significantly once again over the past few months. However, given their current very low levels, the potential for further declines appears to have been gradually exhausted.

Interest rate forecast for mortgages from PostFinance

In the coming year, we expect further policy rate cuts by the SNB and, in turn, lower financing conditions for Saron mortgages. On the other hand, fixed-rate mortgages are expected to trend sideways and maybe even trend slightly upwards in the medium term. This is because the current level of capital market interest rates is very low given 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. situation and already reflects the expectation that the SNB will soon return to negative interest rates.

Development of mortgage rates in Switzerland

Although interest rates for fixed-rate mortgages in Switzerland rose sharply in 2022 and the beginning of 2023 due to a rise in inflation and tightening of monetary policy, they have now been declining for a year and a half. This downward trend relates to the expectation of large policy rate cuts by the SNB. It is interesting to note that the current level of fixed-rate mortgages was only reached historically in phases when policy rates and, in turn, short-term 3-month SARON rates were zero or even negative. The potential of interest rates for fixed-rate mortgages to fall further appears limited. Instead, a slight upward trend is to be expected.

A Saron or fixed-rate mortgage

The PostFinance attractiveness index continues to decline. Despite the latest major policy rate cut, however, fixed-rate mortgages remain the more attractive financing option. This is due in particular to the sharp decline in capital market interest rates and the associated lower financing costs for fixed-rate mortgages in the previous quarter. In the event of further monetary easing by the SNB, however, Saron mortgages could once again become more attractive than fixed-rate mortgages in the medium term.

Interest rate forecast for download