Mortgages

Mortgage Barometer Q3 2019 – benchmark rates for 10-year fixed-rate mortgages fall below “magic” 1% mark

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

Benchmark rates for 10-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. This is revealed by the latest Mortgage Barometer from comparis.ch.

In mid-August, benchmark rates slipped to 0.99% – and thus below the “magic” 1% mark – for the first time. At the end of September, the average rate achieved on a 10-year fixed-rate mortgage was 1.05%. This is 5 basis points less than at the end of June 2019.

 

 

 

Rates of less than 1% negotiable on 10-year fixes

Within a period of one year, the average benchmark rate fell by some 0.6 percentage points. What’s more, there are now just 14 basis points separating 10-year and 5-year mortgages, and 18 between 10-year and 2-year mortgages.

“For a negligible increase in interest, borrowers can lock in low rates for the long term,” says Comparis financial expert Frédéric Papp.

Q3 2019 Q2 2019 Q1 2019 Q4 2018 Q3 2018
10-year fixed-rate mortgage
1.05%
1.10%
1.20%
1.46%
1.62%
Difference between 5-year and 10-year mortgage*
14
15 23 42 49
5-year mortgage
0.91%
0.95%
0.97%
1.04%
1.13%
Difference between 2-year and 10-year mortgage*
18 22 28 51 66
2-year mortgage
0.87%
0.88%
0.92%
0.95%
0.96%
Difference between 2-year and 5-year mortgage*
4 7 5 9 17

* in basis points

However, these benchmark rates are just headline rates. If you compare quotes and negotiate well, you can usually obtain a much lower mortgage rate.

Rock bottom in sight for mortgage rates

According to Papp, various signs point towards mortgage rates stabilizing at a low level. Swap rate trends are one indication of this. For example, the 10-year swap rate hit a record low of -0.7% in mid-August, and at -0.4% was still significantly below the values of the previous quarter at the end of September. However, the average benchmark rate for a 10-year mortgage was only marginally less than that recorded for the second quarter. A similar trend can be observed for 2-year and 5-year swap rates. This indicates that the minimum rate set by mortgage lenders has more or less been reached.

Swiss National Bank relieves pressure

The recent decision by the Swiss National Bank (SNB) should also exert a calming influence on mortgage rates. The SNB has decided to increase the exemption thresholds up to which the owners of sight deposits at the SNB are not required to pay negative interest. This reduces the pressure on banks to pass on negative interest rates to savers.

“Mortgage rates cannot remain in free fall as long as all the banks refrain from charging negative interest on savings,” explains Papp.

However, the banks are unlikely to pass on negative interest rates because they are afraid of triggering the withdrawal of billions of francs’ worth of savings. Applying negative interest rates to savings also represents a social time bomb, as the Comparis financial expert explained in an earlier press release (in German only).

Papp expects negative interest rates to continue or even become the norm on the Swiss capital market. This means that mortgages should remain competitive.

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 January 2020.

Compare lenders

Mortgage Barometers from previous quarters

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.