Mortgages

Mortgage Barometer Q4 2020 – mortgage rates defy second coronavirus wave

ANALYSIS
| By Frédéric Papp |
Source: iStock / in4mal

Despite the second wave of coronavirus, benchmark rates for fixed-rate mortgages have hardly changed at all – to the advantage of mortgage borrowers. Comparis financial expert Frédéric Papp expects the mortgage rate market to become more dynamic in the coming months.

During the past three months, rates for 10-year mortgages (by far the most popular mortgage term) fluctuated between 1.04% and 1.07%, just above the psychologically important 1% mark. There was no change in the mortgage rates for five-year and two-year fixed-rate mortgages.

 

 

This contrasts with the first wave of coronavirus, when the mortgage market was much more unsettled. At the end of the first quarter, the benchmark rates for ten-year fixes rose from their all-time low of 0.98% to almost 1.20% within just a few days.

Good time for a tactical approach

“We can expect the mortgage rate market to become more dynamic again in the next few months,” predicts Papp. This depends chiefly on the mortgage policies adopted by lenders. At the beginning of the year, they often favour particular mortgage periods and offer attractive rates for the selected repayment terms. This could well intensify competition between lenders again – to the distinct advantage of homeowners and first-time buyers. Such market conditions, reflects Papp, invite borrowers to be more tactical about taking out a mortgage. This involves observing the market closely.

It’s worth considering multiple deals

When it comes to mortgages, comparing a range of offers is just as important as getting the timing right. Data gathered by HypoPlus, the mortgage specialists of the Comparis group, reveals significant differences between the deals on offer.

Ten-year fixed-rate mortgages are available from as little as 0.61% (as at December 2020). This is 0.44% less than the average benchmark rate of 1.05% (as at 5 January 2021). On a mortgage of 750,000 francs, this difference translates into 3,300 francs per year or well over 30,000 francs over the whole term. Stiffer competition between lenders tends to widen the interest rate gap.

Saron mortgage same price as a 7-year fix

As the table below shows, rates for short-term, medium-term and long-term mortgages remain very similar. At the end of December 2020, the difference between a ten-year and a five-year fixed-rate mortgage was just 15 basis points. A five-year fixed-rate mortgage is only 4 basis points more expensive than a two-year mortgage.

Q4 2020
Q3 2020 Q2 2020 Q1 2020
Q4 2019
Q3 2019
10-year fixed-rate mortgage
1.05%
1.05%
1.11% 1.17%
1.09% 1.05%
Difference between 5- and 10-year fixed-rate mortgages (in basis points)
15
14 16 20 16
14
5-year fixed-rate mortgage
0.90%
0.91%
0.95% 0.97%
0,93%
0.91%
Difference between 2- and 10-year fixed-rate mortgages (in basis points)
19 19 22 28 22 18
2-year fixed-rate mortgage
0.86%
0.86%
0.89%
0.89%
0.87%
0.87%
Difference between 2- and 5-year fixed-rate mortgages (in basis points)
4 5 6 8 6 4

The benchmark rates provided are average values. The rate actually negotiated is usually considerably lower. A seven-year fixed-rate mortgage can be obtained from as little as 0.55%. This is roughly the same as for a Saron mortgage or repayment terms of 4 to 6 years.

Data sources

HypoPlus, the mortgage specialists of the Comparis group, provides the interest rates for the Comparis Mortgage Barometer. They are based on the benchmark rates of some 50 lenders. They are updated daily and published in the mortgage rate overview. Experience shows that interest rates offered in mortgage quotes are usually below the official benchmark rates. The next Mortgage Barometer will appear at the beginning of April 2021.

Mortgage Barometers from previous quarters

3rd quarter 2020 – mortgage rates kept in check as competitive pressure decreases

Mortgage rates continued to remain steady in the third quarter of 2020. What’s more, the interest rate difference between ten-year, five-year and two-year mortgages lessened further. Some money market mortgages were just as cheap as five-year mortgages.

2nd quarter 2020 – coronavirus sends mortgage rates on a rollercoaster ride

Thanks to coronavirus, the mortgage market remained turbulent and hard to predict. At the end of the first quarter, the rates for ten-year fixes shot up from their all-time low of 0.98% to almost 1.20% within just a few days, slipping down to 1.07% in April and May. Since then, they have started to rise again. At the end of June, the benchmark rate reached 1.11% – historically a very low value.

1st quarter 2020 – sharp increase in benchmark rate for 10-year mortgages

Coronavirus is fuelling uncertainty on financial markets, and this is reflected in mortgage rates. The benchmark rate for 10-year fixed-rate mortgages has risen significantly within a short period. On 9 March, the benchmark rate for 10-year fixed-rate mortgages had reached an all-time low of 0.98%. It then suddenly rose by 21% to 1.19%, settling at 1.15% at the end of March. This is slightly higher than the rate of 1.09% recorded in the fourth quarter of 2019.

4th quarter 2019 – effect of negative rates on benchmark rates

After diving below the magic 1% mark, benchmark rates for ten-year fixed-rate mortgages have started to climb slightly once again. Negative interest rates could lead to mortgages becoming more expensive in the future. In the final quarter of 2019, the benchmark rate for ten-year fixed-rate mortgages climbed to 1.10%. This is 11 basis points higher than the record low reached in August 2019.

3rd quarter 2019 – diving below the magic 1% mark

In the third quarter, benchmark rates for ten-year fixed-rate mortgages dropped again in comparison with the previous quarter. They even fell briefly below the “magic” 1% mark for the first time. “However, there are various signs that point to mortgage interest rates reaching a floor,” says Comparis financial expert Frédéric Papp.

2nd quarter 2019 – 10-year mortgages nearly as cheap as 5-year deals

At slightly over 1%, benchmark rates for ten-year fixed-rate mortgages were lower than ever in the second quarter of 2019, and within touching distance of the rates for five-year and two-year fixes. This is revealed by the Mortgage Barometer from comparis.ch.

1st quarter 2019 – benchmark rates below 1% for the first time

In the first quarter of 2019, benchmark rates for five-year fixed-rate mortgages slipped below 1% for the first time. Ten-year fixes now also cost less. This is revealed by the Mortgage Barometer from comparis.ch.

4th quarter 2018 – significant change in benchmark rates

Some benchmark interest rates for fixed-rate mortgages dropped significantly in the fourth quarter of 2018. Ten-year fixes witnessed the biggest decrease. Demand for short-term mortgages is surprisingly high. This is revealed by the Mortgage Barometer from comparis.ch.

3rd quarter 2018 – shift to medium-term mortgages

Interest rates for fixed-rate mortgages increased slightly in the third quarter of 2018, with the steepest climb occurring in September. Coinciding with this rise, demand for long repayment terms eased off for the first time since the end of 2017 – with demand for medium-term mortgages surging in its place. This is revealed by the Mortgage Barometer from comparis.ch.

2nd quarter 2018 – interest rate increase has not yet come about

There were virtually no changes to interest rates for fixed-rate mortgages during the second quarter of 2018. The economic and political developments of recent months suggest that interest rates in Switzerland will continue to remain low. Demand for long repayment terms has further increased. 

1st quarter 2018 – mortgage rates have risen appreciably

Interest rates for fixed-rate mortgages increased during the first quarter of 2018. For medium and long repayment terms, rates even reached a two-year high in mid-February. As borrowers generally expected rates to rise further, demand for long-term mortgages grew and has now returned to the level it was the previous year.

4th quarter 2017 – signs point to an increase

At the beginning of the year, rates for fixed mortgages remained steady at around the level of the previous quarter. Since then, signs that rates are set to rise have been multiplying. This is confirmed by the interest rate swap for ten-year fixes. It has been rising sharply since mid-December, which indicates that hedging costs are continuing to go up. Demand for medium-term mortgage terms grew appreciably in the last quarter.

3rd quarter 2017 – mortgage rates stay low

Interest rates for fixed-rate mortgages remained more or less the same during the third quarter of 2017. Surprisingly, despite rates remaining at an all-time low, demand for very short terms increased at the expense of medium terms.

2nd quarter 2017 – mortgage rates have dropped

The benchmark interest rates for fixed-rate mortgages dropped slightly during the second quarter of this year. Nevertheless, demand for fixed-rate mortgages with long terms was still comparatively low. In contrast, demand for medium terms rose appreciably, even though the interest rates for this segment witnessed the smallest reduction.

1st quarter 2017 – mortgage rates show little movement

The mortgage rates for fixed-rate mortgages in Switzerland changed only slightly during the first quarter of 2017. After the historic low that was reached in the autumn of 2016, the situation now appears to be settling down. However, with the forthcoming elections in France, continuing Brexit developments and the still vague status of US economic policy, there is cause for some uncertainty.

4th quarter 2016 – mortgage rates rise again

After interest rates for fixed-rate mortgages hit an all-time low last autumn, it seems that the tipping point has been reached on the mortgage market. Rates for fixed-rate mortgages rose in the fourth quarter of 2016 and have now returned to the level recorded in early 2015.