Coronavirus: your mortgage questions answered

Source: iStock / EmirMemedovski

Coronavirus is not just affecting our everyday life – it’s having an impact on mortgages too. How will the crisis affect mortgage rates? And how might it impact property prices in the long term? Is it worth investing in property in the current situation? Comparis has put together a series of questions and answers on these topics for you.

How will coronavirus affect mortgage rates?

This is currently difficult to predict. Low money and capital market interest rates tend to reduce the price of mortgages because they make refinancing cheaper. But coronavirus is putting an enormous strain on the economy. This increases property market risks. Lenders usually offset higher credit and market risks by raising interest rates.

A survey carried out by Comparis partner service HypoPlus at the end of April showed that employees in the mortgage industry expect rates on medium-term and long-term mortgages to stay stable or increase.

Should I attend to my mortgage now or wait until the situation has settled down?

Predicting mortgage market changes is fraught with uncertainty, particularly in such unsettled times. The decision whether or not to buy a home or postpone the purchase depends on various factors, the following being of particular relevance during coronavirus:

  • Long-term stability of income
  • Estimated probability of a significant drop in the property's price
  • Individual ability and willingness to take risks
  • Individual degree of flexibility

The mortgage specialists at Comparis partner service HypoPlus will be pleased to provide clear, independent advice on any questions you have about your mortgage.

Will there be any changes to my current mortgage?

Not really. Mortgage agreements usually give lenders a unilateral right to terminate the agreement if, for example:

  • Repayment and interest amounts are outstanding
  • The borrower's credit standing becomes significantly worse
  • The property loses considerable value

If the coronavirus crisis gets worse, banks may exercise their termination rights. However, lenders usually work with borrowers to find a solution that will return the loan-to-value ratio to its correct level. Loan agreements are rarely terminated. 

How will the property market and house prices be affected?

It depends on the duration and intensity of the coronavirus pandemic. If the pandemic cannot be contained in the foreseeable future, a severe recession is likely. This will lead to corporate bankruptcies and unemployment. A decline in immigration can also be expected. These and other factors will put pressure on the prices of business properties, rental apartments and owner-occupied property alike.

Is it worth investing in property right now?

Property investments in the these times of economic uncertainty should be considered very carefully. If the virus stunts the global economy over a longer period, this will leave deep scars on all markets and sectors of industry. If property prices fall dramatically in the wake of the coronavirus crisis, lenders may demand more of a property owner's own funds to allow the customary maximum loan-to-value limit of 80% to be maintained. The government and issuing banks have announced billions of francs in rescue packages and some significant interest rate cuts to help combat a sustained global economic crisis. It is currently difficult to assess whether and to what extent these measures will have an effect.

What happens if I received a mortgage offer before the crisis? Are the interest rates still valid?

Some lenders guarantee their mortgage rates for a period of up to two weeks. Others only set the interest rate when the agreement is signed. The validity period for the conditions offered is always stated on binding mortgage offers.

Do you have any other questions about coronavirus? See our article on the subjects of health insurance, employment, pensions and travel. We also answer questions on the topics of continued payment of wages and property and moving home.