Mortgages

Mortgage Barometer Q4 2019 – negative rates could make mortgages more expensive

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

After diving below the magic 1% mark, benchmark rates for ten-year fixed-rate mortgages have started to climb slightly once again. The negative interest rate environment is one factor that could also lead to mortgages becoming more expensive.

For years the economy has been propped up with ultra-low rates, but this hasn’t exactly resulted in a boom. The continuation of low-interest rate policies has also pushed mortgage interest rates to record lows. At the height of the 2008 financial crisis, banks were charging over 4% interest on ten-year mortgages. By the end of December 2019, this figure had dropped to 1.09% – nearly four times lower.

 

 

However, negative interest rates could trigger the opposite effect going forward, making mortgages more expensive. The longer the negative rate phase lasts, the bigger the incentive to withdraw savings from banks – or not deposit them there in the first place. If savings deposits sink, there is less money available for refinancing mortgage lending. And if this happens on a large scale, there could be fewer mortgages on offer. The logical consequence to such scarcity would be a price increase – which in this case would mean higher mortgage interest rates.

Slightly higher interest on mortgages

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. The rate sat at 1.09% as of 31 December 2019, which was slightly higher than the rate at the end of the third quarter. Interest rates on two- and five-year mortgages were nearly the same as in the previous quarter.

Despite generally low interest rate levels, there are some marked differences in the mortgage deals publicized by lenders, ranging from a high of 1.40% all the way down to 0.82% at the bottom end of the scale.

According to data from HypoPlus – an independent mortgage broker and partner service of Comparis – it would be possible to save up to 2,900 francs per year on a 500,000 franc mortgage. Skilful negotiations can result in paying even lower rates.

Minimal difference between five- and ten-year mortgages

Amazingly, there continues to be little difference between the rates on five- and ten-year mortgages. Ten-year mortgages are only 16 basis points more than five-year deals and 22 basis points more than two-year deals. Now would be a great time to lock in low long-term rates.

Q4 2019 Q3 2019 Q2 2019 Q1 2019 Q4 2018 Q3 2018
10-year fixed-rate mortgage
1.09%
1.05%
1.10%
1.20%
1.46%
1.62%
Difference between 5- and 10-year fixed-mortgages (in basis points)
16
14
15 23 42 49
5-year fixed-rate mortgage
0,93%
0.91%
0.95%
0.97%
1.04%
1.13%
Difference between 2- and 10-year fixed-mortgages (in basis points)
22 18 22 28 51 66
2-year fixed-rate mortgage
0.87%
0.87%
0.88%
0.92%
0.95%
0.96%
Difference between 2- and 5-year fixed-mortgages (in basis points)
6 4 7 5 9 17

Data sources

The interest rate information in the Comparis Mortgage Barometer is based on the benchmark rates of over 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 2020.

Mortgage Barometers from previous quarters

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.

You can find more information here: Mortgage Barometer for the third quarter of 2019

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.

You can find more information here: Mortgage Barometer for the second quarter of 2019

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.

You can find more information here: Mortgage Barometer for the first quarter of 2019

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.

You can find more information here: Mortgage Barometer for the fourth quarter of 2018

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.

You can find more information here: Mortgage Barometer for the third quarter of 2018

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. 

You can find more information here: Mortgage Barometer for the second quarter of 2018

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.

You can find more information here: Mortgage Barometer for the first quarter of 2018

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.

You can find more information here: Mortgage Barometer for the fourth quarter of 2017

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.

You can find more information here: Mortgage Barometer for the third quarter of 2017

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.

You can find more information here: Mortgage Barometer for the second quarter of 2017

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.

You can find more information here: Mortgage Barometer for the first quarter of 2017

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.

You can find more information here: Mortgage Barometer for the fourth quarter of 2016