Reference interest rate in Switzerland: when can I request a rent reduction?

1. What does the reference mortgage interest rate mean for tenants?

The reference mortgage interest rate for rental arrangements is based on the average mortgage interest rate of Swiss banks (link not available in English). It is communicated quarterly by the Federal Office of Housing. Since 2 December 2023, the reference interest rate for mortgages has been 1.75%. 

The reference rate offers a point of reference for calculating rents. You can find the currently applied interest rate in your tenancy agreement or most recent rental increase notice.

If the reference rate falls by 0.25%, you as a tenant are generally entitled to a rent reduction. Conversely, if the reference interest rate rises by 0.25%, your rent may increase.

However, landlords do not have to reduce rents automatically when the reference rate goes down. It’s therefore up to tenants to take action themselves and submit a reduction request to the landlord.

2. When does the rent reduction take effect?

Any reduction in rent only takes effect after the next standard contract termination date. Don’t wait too long. Keep in mind that all the tenants listed in the rental agreement must sign the letter requesting the rent reduction.

3. What about parking space rental prices?

It’s possible to get a reduction in the rental price of an ancillary unit such as a parking space or hobby room, provided there is an “inherent connection” between the main unit (apartment/house) and the ancillary unit. This is deemed to be the case if both units are covered by the same agreement.

An “inherent connection” also exists in the case of two separate rental agreements if

• the ancillary and main unit are let by the same company and 

• it’s clear that the ancillary unit was only rented because the main rental unit is part of the same property.

4. What should I do if my rental company/landlord refuses?

Your rental company/landlord must respond to your letter within 30 days. They can deny the request for the following reasons:

• value-enhancing investments were made.

• there have been cost increases or inflation. 

• the rental company/landlord can prove that it does not generate any excessive income from the rental property even without the rent reduction. 

• the rental company/landlord proves that the rent is within the range of typical neighbourhood or local rent levels even without the rent reduction. In this case, they usually have to name specific comparable properties.

As a tenant, you should check the following if your rent reduction is denied:

• Landlords may charge a maximum of 0.5% of the net rent to cover increases in operating and maintenance costs. 

• Inflation: by law, landlords may only pass on up to 40% of the inflation accumulated since the last rent adjustment to the tenant.

Disagree with the rental company’s response? Then contact the conciliation authority within 30 days of the response.

Note: not all tenants can benefit from a lower reference interest rate. Rental agreements with indexed or government-subsidized rent (often the case with housing cooperatives) are not linked to the reference rate. Tenants with such a contract are not entitled to this kind of rent reduction.