Fixed-rate mortgages in Switzerland: what you need to know
A fixed-rate mortgage lets you hedge against rising interest rates. What are the risks involved? What are the alternatives? Comparis explains the ins and outs.
15.03.2023
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1. How does a fixed-rate mortgage work?
The name says it all: the interest rate of a fixed-rate mortgage is fixed over a certain term. The usual repayment terms are between two and ten years. In certain cases, individual providers also offer terms of up to 15 or 20 years.
The repayment of the mortgage usually takes place at regular intervals. The less you owe the mortgage lender, the lower the interest cost. However, there are other ways to repay the mortgage. You can read more about this here: Amortization.
2. What are the advantages of a fixed-rate mortgage?
For fixed-rate mortgages, interest rates are fixed. This results in the following advantages:
Maintain low interest rates
If the interest rate is low, you can tie it up over the entire term of the mortgage. This is particularly useful when interest rates are low or if you expect interest rates to rise.
Stable cost
The cost of the mortgage remains stable and calculable. This gives you planning certainty for your budget – even if the interest rate situation on the market suddenly changes.
Is a fixed-interest mortgage the right choice for me?
If you don't expect your living conditions to fundamentally change during the term, then a mortgage with a fixed interest rate makes sense.
3. What are the drawbacks of a fixed-rate mortgages?
Depending on the circumstances and markets, a fixed interest rate carries various risks:
Falling rates
With a fixed-rate mortgage, you will not be able to capitalise on a sudden dip in interest rates – at least throughout the mortgage term.
Good to know: once the term has ended, banks set a new interest rate. The new interest rate is based on the current market situation. You may therefore have to roll over your mortgage or remortgage at a higher interest rate than the initially agreed fixed rate. You can minimize this risk by renewing your mortgage early.
Personal circumstances change
The longer the mortgage term, the greater the risk of your income situation changing in the meantime – as a result of you losing your job or switching to part-time hours, for instance. Such changes can make repaying your mortgage difficult. A fixed-rate mortgage can also become a burden in the event of a divorce.
Repaying a mortgage early
Paying off your mortgage before the end of the term can be expensive. Banks can levy a hefty charge for this. You can find more information here: early mortgage repayment.
4. How do I choose the best fixed-rate mortgage?
Get an overview of the latest interest rate developments. Which fixed-rate mortgage best suits you depends, among other things, on the property being mortgaged, your income and, of course, the provider.
HypoPlus, a Comparis partner service, helps you find the the best interest rate. The advantage is that you don't have go ringing around for quotes.
What are the current interest rates on fixed-rate mortgages?
The following list shows you just how important it is to compare mortgages. Here you can see the differences between the best mortgage rate from HypoPlus and the average rate offered by all lenders:
| Duration | HypoPlus interest from | Average benchmark rates |
|---|---|---|
| 2 years | 2.15% | 2.64% |
| 3 years | 2.19% | 2.68% |
| 4 years | 2.20% | 2.72% |
| 5 years | 2.23% | 2.72% |
| 6 years | 2.24% | 2.77% |
| 7 years | 2.26% | 2.78% |
| 8 years | 2.27% | 2.80% |
| 9 years | 2.28% | 2.82% |
| 10 years | 2.29% | 2.82% |
| 12 years | 2.30% | 2.81% |
| 15 years | 2.51% | 2.83% |
| 20 to 60 years of age | 2.71% | 2.88% |
The calculation is based on a mortgage amount of CHF 750,000. Last update: 15 March 2023.
Indicative rates: buyer beware
Interest rates advertised by banks are not necessarily the best rate. They are average values and are used for indicative purposes only. They are calculated assuming good credit and a good property. Find out more: what are indicative rates?
5. How does a fixed-rate differ from other mortgages?
You don't always have to opt for a fixed-rate mortgage. Depending on your circumstances, a different type of mortgage may be better suited to your needs. The most important differences are:
Saron mortgage:in contrast to a fixed-rate mortgage, a Saron mortgage does not have a fixed term. The interest rate changes every three months.
Variable-rate mortgage: you can also terminate the variable-rate mortgage at any time. The interest rate is significantly higher than with fixed-rate and Saron mortgages. Variable-rate mortgages are normally taken out for loans of up to 100,000 francs.
Hybrid mortgages: splitting your mortgage up lets you combine different types of mortgages.
This article was first published on 28.05.2020
