I’m pretty sure you could have made a bigger mistake than potentially overpaying by max 1.35% (more probably half of that) for 6 years. I certainly have.
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It’s still a decent rate.
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Thanks, it really helps looking at it from this angle.
Moreover, please do not forget, that you can deduct a part of the interest rate.
So, if your rate is 1.35% and assuming your marginal tax rate is 35%, your effective interest rate is 0.8775%.
1.35% is abolutely fine. People are just focusing on the lowest levels 
But an interest rate of 2% would be a normal level.
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That is a good point, I can sleep better now 
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I’m in this situation. The fact is that you also get very good fixed rates as well, so it’s pretty tempting to fix at say 0.8% for 5 Years… To go 100% SARON, the SNB rate needs to drop below 0.5%, which might happen, and some members here seem to realistically see happening.
Currently waiting for the numbers to refresh around 10am, but will most likely fix 430k this morning, and will finance 570k in SARON.
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In their latest rate newsletter UBS now foresee a SARON rate at 0.75% by end of 2024 and 0.5% by mid 2025. Usually they are wrong, let’s hope this time they’re right ^^.
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Some analysts now anticipate the ECB to cut rates to as low as 1 - 1.5% in 2025 because of the latest inflation and growth data. Some CH analyst I follow is saying SNB would be forced to cut down to 0 if that happens…
1% I can hardly believe. Market also does not price that in at all.
2% is realistic at the moment.
We are going back to 0-0.5% soon. Saron still the king longterm.
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Currently have an offer for 1.35% for 10y, should I just go for it or still take SARON instead, hoping that rates will drop even lower by the end of this year/next year?
I would take SARON. 2 further cuts of at least 0.25% are expected in next Q4 and Q1/2 2025. Better to not lock in something now.
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It seems a great rate. Would you mind sharing some details, like LTV (80% or <66%) and affordability? Is that a standard rate or some new customer or employee deal?
What’s the corresponding SARON margin?
Let’s say 0.5%. So if all goes to plan, you’d pay some 1% mid of next year. That’s 0.35% difference, or some 0.2% to 0.3% after tax.
The expected decreases are priced in. Your upside with SARON is thus limited to 0.5%, the downside in 5 or 7 years? Who knows.
Question is how much premium you are willing to pay for the lock-in, in general. And how much risk in the next few months, where your 10-year rate could change daily by 0.10% or so.
That trade-off is universal, whether you have a great or a lousy rate.
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I’d personally go for the 1.35%, but I prefer the stability and 1.35% is a good rate. A few people expect more rate cuts, so there’s a possibility that the rates could go down further. Although, the opposite could happen and fixed rates could go up (regardless of what happens to short term rates).
If you can‘t decide, you can also lock in a part of the mortgage for 10y, the other part in Saron.
Be aware to match the end date, e.g. taking a 9y fixed, in one year.
I will also renew soon, and looking to potentially switch my mortage provider, since their rates aren’t the best (kantonalbank…).
I wonder how it works: I have 1 tranche coming up in mid 2025, and the 2nd and last tranche in mid 2028. If I switch provider, will I also need to fix my 2028 rate when I fix the 2025 one? So in this case I should also calculate how much I am “losing”, since my 2028 rate is quite good, no?
Also, if I switch mortgage provider they will re-check everything I assume (income, affordability, etc.), but then I can also request they re-evaluate the value of the home (which helps with reaching a better affordability), or am I mistaken?
@mods: not sure if if this is offtopic or not. In case feel free to make it a new thread
I wonder how it works: I have 1 tranche coming up in mid 2025, and the 2nd and last tranche in mid 2028. If I switch provider, will I also need to fix my 2028 rate when I fix the 2025 one? So in this case I should also calculate how much I am “losing”, since my 2028 rate is quite good, no?
I don’t think you can switch provider now, unless you are able/willing to pay the penalty for the early termination on the 2028 tranche. That’s why tranches with non-matching maturity are usually not recommended.
If your 2028 rate is good, it might not be that bad though (but at the same time, it means giving up on a good rate). If I am not mistaken, the penalty is usually based on the difference between the current rate and your rate: going from low to high is cheap because they would rather get that low rate mortgage off their books.
Maybe a solution is to switch your first tranche to SARON/3y-fixed for the next 3 years, and then re-evaluate in 3 years?
As you said, you need to do the maths to see what makes sense.
Also, if I switch mortgage provider they will re-check everything I assume (income, affordability, etc.), but then I can also request they re-evaluate the value of the home (which helps with reaching a better affordability), or am I mistaken?
Yes to the first one, and I would say yes to the second one, but not entirely sure.
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Sounds a like a really good rate in terms of bank margin.
10 year swap sitting at 0.5825 today so bank margin is ~ 0.72
Got the swap numbers from here:
https://zkb-finance.mdgms.com/home/bonds/index.html?LANG=en#
Everyone is expecting the SARON to drop more, but it doesn’t mean the fixed will go down hand in hand.
- Do you want to amortize any of it?
- Do you want predictability of the payments?
- Would you consider doing part fixed, and part SARON?
If I were in that situation I’d probably do a mix of SARON + Fixed at 1.3% to have a mix of predictability and flexibility to amortize some (or lock in more if fixed rates go down more)
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Does anyone working in the banking sector know definitively if this equation makes sense? @HoiZame
A = B + C
10y Fixed Mortgage Rate (A) = 10y SWAP Rate (B) + Bank Margin (C)
For example on MoneyPark it shows 10y Fixed @ 1.39% (MoneyPark: The leading specialist in mortgages & real estate)
The 10y SWAP rate is 0.5825% according to zkb
(https://zkb-finance.mdgms.com/home/bonds/index.html?LANG=en#)
Does that mean the Bank Margin is = (1.39% - 0.5825%) = 0.8075% ?
or is there some additional markup “D” for counter-party risk etc? (and therefore the equation becomes A = B + C + D ?
And side question - is it reasonable to think that the “10y” fixed @ 1.39% is “easy” to obtain from most banks right now? or is that MoneyPark quote just a best case scenario ?
Appreciate the replies, thank you
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For the banks I work with yes, whatever is on top of the base rate (swap in that case) is considered margin. However the margin could be coming from different departments within the bank. For instance the treasury could decide to introduce a liquidity markup because the market conditions are bad and those kind of markups would be hardly negotiable and could be considered part of the base rate.
The pricing of a saron tranche is a lot simpler as you really only have two components.
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