Mortgages

Latest Mortgage Barometer Q3 2018 – slight increase in rates

ANALYSIS
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The latest mortgage rates and how they have changed in the last few quarters. Source: iStock / in4mal

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.

Compared to the previous quarter, interest rates for 10-year fixes rose by six basis points, with benchmark rates lying at 1.62 per cent at the end of the third quarter. Also slightly higher than in the previous quarter were the benchmark rates for five-year mortgages. They had reached 1.11 per cent by the end of the second quarter, but rose to 1.13 per cent during the course of the third quarter. Interest rates for short repayment terms remain unchanged at 0.96 per cent. Despite rates remaining low, borrowers are increasingly taking out mortgages with medium repayment terms. Demand for long repayment terms eased off for the first time since the end of the fourth quarter of 2017 – with demand for medium-term mortgages surging in its place.

Greater demand for medium repayment terms

While mortgages with long repayment terms are still the most popular, accounting for almost 80 per cent of the market, this has dropped by some five percentage points – and demand for medium terms has picked up the slack. This is the first drop in demand since the end of 2017. Short repayment terms also lost out slightly, their share falling from 4.0 to 3.6 per cent. By contrast, demand for medium repayment terms has risen sharply. In the second quarter, only just over 12 per cent of borrowers opted for a repayment term of less than seven years. By the end of the third quarter, this figure had climbed to just under 18 per cent.

 

“This shift in demand may be due to the fact that it was still possible to take out a medium-term mortgage at a rate of one per cent in the last quarter,” says Comparis banking expert Dominik Weber. Interest rates for ten-year mortgages rose more steeply in comparison. “Mortgage rates of one per cent are an important psychological threshold,” he explains, adding that many borrowers first select their preferred monthly interest payment and then choose the corresponding repayment term.

Low rates expected to continue in the medium term in Switzerland

At the beginning of the year, benchmark rates had risen dramatically, signalling a rapid reversal of interest rates. However, Weber notes that there are conflicting trends at macroeconomic level, which could firmly put the brakes on any interest rate increase. Although the recent interest rate hike by the US Federal Reserve and the conclusion of a new trade agreement between USA, Canada and Mexico signalled a sustained increase in interest rates, the World Trade Organization only recently lowered its growth forecast for the global economy, arguing that the expansion of trade tariffs would lead to increased risk. Growth also remains modest in the eurozone. Since the Swiss National Bank will only respond in accordance with developments in the eurozone, Weber believes the low interest rate trend is set to continue in the medium term. “A rapid increase in key interest rates in Switzerland is highly unlikely in the current climate,” he concludes.

 

Tip: Just as important as choosing the right type of mortgage is deciding on the right mortgage lender. Many borrowers are unaware that insurance companies and pension funds – as well as banks – offer mortgages. It's therefore well worth extending your enquiries beyond your own bank and obtaining quotes from insurance companies and pension funds as well.

Mortgage Barometers from previous quarters

Mortgage Barometer for the second quarter of 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. 

Mortgage Barometer for the first quarter of 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.

Mortgage Barometer for the fourth quarter of 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.

Mortgage Barometer for the third quarter of 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.

Mortgage Barometer for the second quarter of 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.

Mortgage Barometer for the first quarter of 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.

Mortgage Barometer for the fourth quarter of 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.