Hi Folks,
I am in the process of selecting renewal condition for one of my mortgages that is due to expire in June 2022.
UBS have written to advise me that the 10 year fixed rate has risen from 1.39% on 03March 2022 to 1.69% on 18March2022.
The bank adviser attributed this to a rise in volatility and nervousness at the financial markets.
I had understood that retail mortgage interest rates were coupled with the Swiss National Bank interest rate which has not changed from -0.75% since this day last year.
I am wrong about the coupling to the SNB interest rate? Or am I looking at the wrong numbers in the link below?
Appreciate your advice Folks.
Source: https://www.snb.ch/en/iabout/stat/st...xchange_rates#
Scroll down for the excel table of rate for the last 12 months
In this case for the 10YR, you need to check the Yield on Swiss Confederation bonds 0.383% (Spot interest rate for 10-year maturities) which as you can see has been rising since December.
Back in August 2021 it was in the negative range and UBS was advertising 8 yr rates at 0.8%...
I guess that the current situation is affecting the market, maybe will get better by the time you need to lock the rates for the renewal.
Maybe another option is to switch to Saron? Looks like it is still in the negative territory, and as far as I know you can switch from Saron to a fix mortgage if needed (you might need 1 quarter in advance before).
Of course, this is not financial advise and best is to talk to your bank advisor for recommendations and different options for lower rates.
The banks are looking forward and guessing where their rates will be 10 years from now. That thinking has changed over the last weeks
What is important to them today is not what today’s SNB rate is, but where it will be in 2032.
Saron has been low and stable for some time. Its a risk, but you should be able t change with a months notice.
Thanks for your helpful replies.
Yes, I could go to SARON in the interim but my fear is that SARON will eventually hit 1.69%+ & by that time the fixed rates will be headed for the moon.
1.69% is not a bad rate to fix for 10 years but if I could do better of course I would.
The yield on Swiss Confederation bonds only breached above zero on 10January presumably in response to predictions of quantitative tightening from the Federal Reserve & ECB & perhaps accelerated by the war in Ukraine more recently but what do I know?
Before nobody was worried about inflation and wanted inflation.
Now everybody is worried about inflation and don't want inflation any more.
covid creating inflation from supply chain.
ukraine war creating huge energy spikes and will have knock on effects in a ton of commodities. all these have gone through the roof and are also key inputs to other products.
i expect prices for many things to go up (a lot already has, gas prices, oil, petrol, food). i expect central banks to (inadvisedly, imo) raise rates to counter these price increases.
One of these answers is correct. The other is a layman guessing incorrectly.
Playing the variable until rates rise game can be risky. When the SARON starts going up, the price of the fix will go up too. Obviously you could still win, but do you feel lucky (punk)? I can’t remember the rate we were paying on our LIBOR mortgage, but the rate we got when we fixed it for 9 years in 2019 is better than I could get today for the same term or likely also just to fix to 2028 (CS website isn’t showing the rates right now).
This page shows the development over time. I think they use their lowest available rate, which is not usually the published bank rates, but they are similar to the best offer you can receive from a bank.
https://www.comparis.ch/hypotheken/z...insentwicklung
We anticipated this rate hike would happen, so we talked to our bank about renewing our 10y mortgage early, in December. Our current one is running until April 2023 and the "forward" fee for renewing more than 1y in advance was only 0.03%, so we ended up getting an offer of 1.05%, running from April 2023 to April 2033.
I think it's a real shame that banks don't actively contact customers to ask them if they would like to renew when they know almost for certain that the rates will be going up.
I did more or less the same. Mine renews on 1 Jan 2023, and you can only fix it 18 months in advance (as per my bank), and when inflation started to go up early last year, it was only a question of waiting for the time I was allowed to fix it. I split it into 3 tranches though because I wanted to spread the risk, so I fixed a 10-year tranche last august which was priced well below 1%, but rates started to go up quite a bit towards the end of last year so I fixed another larger tranche in December for something close to 1%, leaving a smaller tranche possibly at Saron. Now I wished I fixed the whole thing last August!
The rate banks charge for mortgages is not necessarily that set by the SNB + markup, but by how much the bank can borrow in the commercial market + their markup. 1.69% is not too bad.
The SNB is also on record as saying they will be at least 6 months behind the ECB before they raise and as far as I can see, the ECB has no appetite for raising just yet. Of course this could all change tomorrow!!!!
In autumn 2020 the 10 year mortgage interest rates were shown as 1.1-1.2, but myself and my acquaintances got offers at 0.7% in various banks (CS, Postfinance, CA). Therefore, there was about 0.4-0.5% point gap between "official" and actual interest rates.
I wonder what the difference is when one renews the whole mortgage (and is therefore free to choose any bank) compared to a partial renewal (and de facto forced to take whatever the bank "offers" without any actual negotiation possible)?
The trouble with "tranches" you are basically tied by the neck to that bank. The reason is that a bank will not want nor is willing to split a mortgage between 2 banks so if a tranche becomes due, either you have to renew it or pay it off, ditto the other ones before you can re-mortgage with another bank.
They rarely mention this when they are extolling the benfits of having several tranches so if the rate moves, it isn't so bad for you.
Also if you sell, then the new owner has zero liabilty to takew over your mortgage, however you are on the hook for the amount x interest rate x time period.....can be very painful.
For time being SARON is way to go, the SNB wil not raise rates until EU raises and they cannot raise right now !! If SNB did raise now, just think of the exodus from Euro to Chf and the resulting exchange rate........absolute disaster for the economy.
What ever happens you would be exceptionally lucky to hit the very bottom rate as you would be exceptionally unluckyto hit the peak rate
Yea, that's a great point actually. Our mortgage is in three tranches, I renewed one tranche in June 2021 & when he came back to me with the various rates across various fixed periods we had a phone call & I pressed him to give me a better rate on a fixed over 8 years, he pinged his boss 7 came back to me minutes later with an offer of 0.015% vs. what he had emailed me so I guess if you don't ask you won't get.
Is it really though? Serious question.
I am tempted to select SARON @ 0.8%, who wouldn't be.
Let's say I select SARON @ 0.8% & SNB does not raise interest rates until December 2022. Then it continues to rise to say 2.0% up to the December 2023 & I then decide that it's getting too high & want to lock in a fixed rate, wouldn't I be almost certainly correct in assuming the fixed rates will be significantly higher & I will have missed the boat in terms of locking in for 10 years at a modest 1.6% because I was in effect chasing a short term lower interest rate in the form of the SARON rate?
I hope the above makes sense.
maybe in your example, the 10 year rates would have gone up to 4%. so yes, you would have missed the boat.
fixed rates have about doubled since I last looked a few months ago. in the end I went with a SARON mortgage as I wanted flexibility.
Personally, I put a lot of value in knowing what I will have to pay every month for the next 10 years. I can't handle the stress of watching interest rates go up and down. I totally get why others would put more value on flexibility - these are very individual decisions.
For the last 10 years, my strategy has proven to be an expensive mistake, as LIBOR/SARON would have saved me 1% per year. Maybe my "losses" will cancel themselves out in the next 10 years if the rates do actually go up, or maybe it's more of the same. At least this time I'm locked in at 1.05% and not 1.75%.
SARON is 3 months renewable,. you can come off SARON with 3 months notice, either pay it off completely or go on to a fixed rate mortgage
Interest rates do not go up and down like a whores' drawers !!
They move up and down fairly slowly, the usual rise/reduction these days is 0.25%.....
With fixed rate that is what it is, fixed for 10 years, if you sell up after 3 years, the 7 remaining years are still due, unless you can persuade your buyer to take over the mortgage with your bank rather than their bank.....not easy.
Some banks will allow you to move the remaining mortgage to another property. So if you are down or up sizing to another property, or you own another property without mortgage, then you can move it.
If you're moving away from Switzerland altogether then you'll have to pay up!
For the last 15 years or so central banks rate have, but that could easily change. However, as explained earlier mortgage fixes are not coupled to central bank rate movements, but rather market yield curves. The SNB rate hasn’t changed since December, but 10 year fixes are currently over 2% (I was looking at CS and ZKB rates with a colleague at lunch today), when in December I believe you could still get them under 1%.
I am actually quite glad that mortgage rates will rise, as we are in the hunt for a house, and I would welcome the downward pressure on the ridiculous housing prices.