@wavemotion well, yes and no, whether it was the right call financially speaking (peace of mind for 10 years aside) can only be evaluated after those 10 years.
Initially you were behind, now you are ahead, but it’s only over the length of entire duration that you will see the definitive answer.
Plus a good outcome does not identify a good decision.
Confirmation or not, this is very good. It’s around the risk-free minimum return of 2nd pillar. I would take the mortgage rate <1% anytime for any duration.
you are probably correct. I looked at the outlook UBS has published last week, with SARON fluctuation. They indeed expect having increase up to 1.25 next year, which goes ± to 2% including banks’ margin.
Looking at 2-3Y fix, under this outlook, FIX vs SARON does not bring more saving with the latter.
Best
Cappuccio
Saron is still worth considering in my humble opinion.
The best offers are around 0.6%, so you’d start at 1.1%. You will definitely save money in the short term as long as the reference rate stays under 1.5%. According to UBS forecasts (Interest rate forecast for mortgages | UBS Switzerland) there could be a good chance for SARON to remain under 1.3% until late 2024.
Your other option would be to opt for a 2 or 3 years fixed rate that immediately starts at 2%. Future rate hikes are already priced in and contract duration isn’t long enough to protect you against what comes next.
This makes sense considering that now it’s going to be even harder to predict what it’s going to happen.
We had (in another thread) the same discussion 1 year ago, and at that time, in my opinion it was easier to decide. Having negative interests rate and governments doing QE, the only possible direction was upwards.
You are right, not so long ago, rates were so low that it wasn’t worth taking any risk. Now it’s different, we are facing supply chain issues, war, energy crisis, inflation and possibly a recession. None of these factors are necessarily stable or permanent.
In 2010, I purchased a flat and signed a 3.15% fixed rate for 10 years. Everyone (and I mean everyone, family, friends and bank advisor alike) told me to choose the longest possible duration as such rates were too good to be true and would never last. Contrary to forecasts, it all moved the exact opposite direction and, as a result, I spent 9 years paying a high interest rate. Fortunately, real estate prices were also much lower.
If you can’t bear the SARON volatility risk, you should be aiming for a minimum of 5 years, possibly 10. A 2 or 3 years contract is only giving you the worst of both worlds. That is, a relatively high rate with virtually no protection.
Considering what happened in the past (2000 and 2008), in the worst case, the base rate could reach 3%
After 2008 I guess it was just an human reaction and it was quite hard to predict the negative interest rates
Fixing a 10Y today, would mean min 2.6% max 3.4%, based on today’s indicative rate of major banks/insurance/pensionfund. For a 3Y, delta is min 2.1% - max 3.1%
The more I think about that, and the more I feel this is mainly a gambling into a bazar. There are too many factors influencing today’s situation which makes a calculated decision very difficoult, because unpredictability of the scenario itself.
By simply looking at the data of last 30years (1990-2020), of course without a proper decontextualization, the trend captured a decline from 7-8% to 4% in the first decade, an average of 4% for the second, and a gradual ramp down for the third one till the values we were familiar in the last period.
Based on what I see, it’s the first time to see an so fast increase of rates (x3) in a 6-month period.
My ideal target nowadays, would be to have the opportunity to fix a 10Y to 2%, but market says forget it. So I count on an inflexion in the next weeks/months, due to the spike.
I know today I could block with a pension fund at 2.77% (including forwarding). Market is so fluctuating (in the last 2 weeks of monitoring, delta of 0.40% observed).
New forecasts from UBS :
to a total of 1.25% … Looking at the current fixed-rate mortgage offering, those moves are already anticipated and priced in.
How much would then a Saron mortgage cost after March 23?
The formula is “bank margin” + “3 months compounded SARON rate”.
Saron is usually slightly lower than the SNB reference rate. Regarding bank margins, the best offers I have seen are
So, after 2 rate hikes of 0.5 and 0.25 respectively, you can expect your final rate to be somewhere between 1.85% and 2.25%.
Which, AFAIK, they only offer for your primary residence. Do the rates change if you are buying to rent out (besides the 25% downpayment requirement)?
I really don’t know, I am not a VIAC customer myself. Since you are only allowed to use your third pillar for amortizing your main residence, I would not be surprised if there were additional limitations in case of an investment property. But again, I have not even read the terms and conditions so, I am speaking out of my ___.
I think one can use 3rd pillar also for non-primary residences. It’s the 2nd pillar that has that limitation AFAIK.
Edit: the above is wrong.
I was pretty sure that it wasn’t possible in the case of a rented good unless you can prove that you can’t use the property yourself (eg: no elevators and you are a disabled person).
There might be some subtle difference between using your 3rd pillar for acquisition or as pledge/collateral, or perhaps I am mixing restrictions that are specific to my bank with legal stuff. Please ignore all my remarks. 
Looks like you are right, 3rd pillar can only be used for your own property, I seem to always have gotten it wrong.
It will now get interesting for how long those higher rates will stay
They will probably remain pretty high until the various central banks reach some pivot point in their effort to get inflation under control.
The perspective of more rate hikes from the SNB => higher rates.
Hi all,
Since mid september I daily monitor the development of the % of 8 different Bank/Insutrance/PK.
I stop considering SARON, due to the recent hints about the upcoming SNB actions.
I need your external opinion on that regard.
I’m still have regular touch points with the current consultant, where I do have my promise of payment done, and he keeps saying that I should go for a 10y FIX as 2-5 years will be a wrong option. His arguments:
Of course, my argument on his points, was clearly pointing out that it’s a very mere PoV as
So, by having that said, I have the impression the consultant is only pushing his interests (longer is the contract, longer is the lock-in, and more commission he will get), even in front of concrete evidences.
I really don’t get the point why in the today’s situation, I should go for a 10y. His behaviour, which honestly I did smell since the begining, does not give me anymore the confidence he’s looking after my interest.
In addition, when he added the point “my company is not interested to negotiate the rates, and also not to mortgages lower than 10y, as we want “good” customers”… this made me speechless. I do understand if the policy does not allow rate negotation (this is what you get, like it or leave it), but I do not tolerate the sentence about good customer. However, I likely took that on personal level, where I should not.
Now, what he proposed, is to keep monitoring the % trend, and in case evaluate the variable mortgage . But I do not understand the difference with the SARON then, as not clear to me which variable rate they will take. He says that this might be also an option, but I fear this is another way to convince me to stay with his firm.
Well, I alredy asked the real estate agency and they will accept the change of the Promise of Payment as soon I will bring a new one with same condition of course - and there are no additional cost for the notary. Today I called the hypotek service and asked about the penalty: 1K CHF.
I’m in contact with other 3 institutes, where I initiated my Dossier. I have to say, that with the others I notice a more accomodating approach, where they are not pushing for a specific option. One of them, expressively told me that in this period, reccomendation is to block 5year and no more. Other ones, listen to my preference for 3y, without telling me this is bullshit (of course, they remark the fact the rates can go up, but even down).
Sorry for my usual scrip-wall, but I really look forward your opinion for this 10y Fix rate. Do you see the rational behind from the consultant, or do you think he only wants to speculate and bring more benefit for his commissions?