Hi all, Seems I just found this forum too late, I just fixed my mortgage to 1.35 for 6 years 1.5 months ago which was an employee rate at a bank (now it is 1.15%)
Normally for a bank employee itâs a no brainer to go for SARON only (if you can bare the risk of course but going down to 0.1-0.3% interest during negative interest phase felt like a cheat code).
Absolutely. Even if you get fired, you can switch quickly to another bank.
Yep obviously the internal customer advisors said nothing, not even a hint, I got into my mortgage when rates flew to 2.2 originally so I was very scared something like this will happen again and thought this rate is low enough, clearly I couldnât have made a bigger mistake. Now seeing Saron rates go down I guess I have to live with this burden for 6 yrs. I calculated potential loss on this term if Saron drops to 0.5% and we have 0.45% margin it will be around 16kâŠ
I think you are looking at this a wrong way.
Your rate would be fixed no matter what ⊠if SNB increases rates by 5% tomorrow. Your rate will still be fixed
Thatâs the hedge you made. This is why when it comes to fixed rates, borrowers shouldnât hope to win against the market, they should simply fix what they are happy with.
I often see hedging being assumed as winning strategy. But itâs more about certainty.
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Iâm 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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Itâs 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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Iâm in this situation. The fact is that you also get very good fixed rates as well, so itâs 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, letâs hope this time theyâre 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 happensâŠ
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?
Whatâs the corresponding SARON margin?
Letâs say 0.5%. So if all goes to plan, youâd pay some 1% mid of next year. Thatâs 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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Iâd 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 thereâs 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 canât 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.