We shouldn’t compare nominal borrowing rates in Switzerland with those in other countries. Different currencies means different depreciation. Maybe real rates can say something, but I am afraid this can only be figured out postfactum. Otherwise, there is an example where low rate CHF credits have cost dearly to Hungarian property owners.
https://www.npr.org/2012/01/31/146140750/for-hungarian-borrowers-a-mortgage-nightmare
I see that in several ways:
How would you react if you lock in the 10 years rate and in 4 years, the SNB rate is negative again and you could find sub 1% rates?
How would you react if you take the SARON deal and in 4 years, rates have gone up and you can’t find anything sub 2.5%?
How often are you willing to negociate with banks and shop for better rates? As you amortize your mortgage and the house hopefully gains value, you should become a more attractive risk for the bank, it’s possible you could get lower margins and better rates (though outside factors have an influence too, like how much the bank actually wants more mortgages, and if your house looses value, your situation would worsen)?
Are there life factors that you are expecting that could affect your decison? (Moving being the big one.)
You have probably already done that, but imho a 1.5M Mortgage should also be doable at 0.7% + SARON or at least 0.8%. Do you have a risky financing deal? Have you checked other banks?
Personally, the intrest costs for me are too high to consider fixed mortgages. Intrest rates need to raise quite a bit and over long periods of time, in order for them to become profitable. I would “put aside” the 1.5% - but go with a cheap SARON and in the worst case you put pay back a portion using the SARON.
One way or the other I’d not pay back a loan with <2% intrest rate under any circumstances personally.
ChatGPT is the source so take it with some salt:
"Using the 10-year fixed Swiss mortgage rate series, the answer is approximately 27 out of the last 30 year-ends were above 1.5%.
That means only about 3 year-ends were clearly below 1.5%: roughly 2019, 2020 and 2021, during the ultra-low / negative-rate period."
Perfectionism can prevent us from accepting what is already good enough… which can lead to negative consequences.
I got in 2015 a 15-years mortgage for 1.1%, and I wasn’t the only one, a friend at the same time got something a bit cheaper, so it looks to me that this is an allucination
Be careful about penalties; read the contracts carefully. I’m thinking of buying a property where the owners face a 125k penalty for terminating the mortgage prior to term.
I was on the phone with my bank today for various reasons and we also ended up discussing mortgages, interest rates, paying down the mortgage, etc.
The financial planner reminded me that many people have forgotten the time when interest rates were 4-5-6% and to ensure some reserves (e.g. a separate investment bucket generating returns) for in case this happens again. Do I expect that to happen soon, no. But you don’t make your financial plan (in my eyes) based on a best case scenario but on a ‘minimizing your maximum regret’ scenario.
Buying into your pension fund is a tax-efficient way of achieving this
Fully agree. I’m very happy that I started making extra contributions when I moved to Switzerland and learned about the 2nd pillar. It really helped me feel a LOT more comfortable about secure financials for retirement. I made an additional substantial contribution from a large severance I was paid (following which my 2nd pillar moved to Freizugigkeitskonto) and my only regret is not having made that payment even larger (immediate tax benefit, but also having it in a FZK which actually generates much better returns than my prior regular pension fund).
I’m not against risk - as I’ve repeatedly shared on this forum I drive extra returns from writing Put options, tax free (!) but not risk free - but still take (and recommend taking!) a balanced approach
There’s another reason to bring your mortgage down: leverage with banks to get much better interest rates!
My saron part = 0.65% - no complaints
I fixed a part that I had in SARON a year ago for 7 years to de-risk things given no longer fully employed with a generous comp => forgot the %, either 0.85% or 0.85% - no complaints
Still have an older longer term fixed interest sleeve which is gradually being amoritzed, once that falls away I’ll be very pleased.
Taking a balanced approach never led to major regrets.
The Bank already calculates at a 5-6% rate for affordabiliry. Furthermore, if you have a SARON mortgage, it’s quite easy to pay down larger parts of it.
I do agree that it’s not smart to plan with a 0.5 or 0.8% rate indefinetly, but over longer periods of time, SARON is just the cheapest. Even if we get 4% interest (very unlikely in the near future) over a couple years, the moment interest drops close to 0 you’re profiting again.
I personally think that keeping interest rates low is an objectively beneficial economic policy. As long as your inflation is in check, this is favorable over a 4%+ interest rate and Swiss fiscal discipline allows for this to be the case, which is awesome.
My wife and I own a flat worth 825K - this is a very sensible price/rate given our gross assets and our income. The flat is about 50-55% of our assets, which for a Swiss residential property is quite reasonable imho. If I google for hypothek, you can see people advertising offers from 0.55 SARON, so that’s why I said, with a 1.5M mortgage, one should get better rates.
Also doing what you do with your mortgage allows the bank to strongarm you, should the mortgages run out in different time frames. Imho that’s not worth for most people, but some prefer that. With SARON it isn’t a real issue ig, because you can pay it back any time you like.
There is a world between the bank checking for a theoretical affordability when the mortgage is issued and people handling their budget to be able and ready to actually pony it up if the need actually arises.
People on this board would probably have no problem dealing with increased interests but most people I know consider that every frank hitting their bank account has to be spent. I would not be surprised if 5% interest rates on mortgages would be a major crisis for most homeowners.
Not only homeowners, but also renters since rent is indexed on it.
Yeah, valid points!
Only over very long time frames, that you may not be exposed to. You can easily hit a 20 year window where SARON is contiuously higher, than fixed rates now.
And it may not ever hit these low levels again. It’s just not knowable beforehand.
You can just expect that on average over the very longterm, short duration will have lower rates than longer duration. Because that’s how yield curves work.
You as an individual can have a totally different experience.
Here’s a forecast from UBS, indicating rates in any case are projected to go up:
Stepping back:
Everybody would like to have a very low interest rate mortgage. We all share that wish.
Where the people follow different approaches (which is fine) is the parameters within which they want to achieve that (e.g. risk but also other variables). I for example do NOT want my mortgage to be 100% SARON even though I have emple reserves to deal with an (uncomfortable) substantial increase in rates. Why?
In other words, we all want low interest rates but it’s also about managing your life through a cycle of ups and downs (not just economically but also professionally and personally). Imagine interest rates go up and just at that moment you have serious and expensive medical issues?
Others have written before that fixing a good rate is like buying insurance. Costs you a bit in the long run but mitigates risks… risks which could be a ‘wipe out’ if stars align in a really bad way.
Finally, we all feel great now more or less but nobody can predict what life may throw at us in a few years time and that includes interest rates. Do I expect interest rates of 4-5% in CH in a year? No. But who knows what could happen 5 years from now? What would happen if for arguments sake Putin goes crazy and attacks a NATO country? My point is: if you think you can predict interest rates, then spend less time on this board and use that skill to make a LOT of money.
Let me add to this with two examples
First, a former colleague of mine. Had just bought a boat, then his employment was terminated, completely did not see it coming. He was the breadwinner in the family (stay at home mom + 2 kids). They had enough stress already… a major mortgage interest increase would be severely disruptive for them financially and from a family vibe.
Second, the original poster. Sure, he has a good income with his partner and could manage an interest increase… but…
I really don’t see much downside from taking a balanced approach to a mortgage so you are positioned well no matter what scenario becomes reality 1 - 3 - 8 years down the line.
This is imho either a sign of bad budgeting or too expensive real estate. In my case, if we had a 5% interest rate, it’d only be marginally more expensive that what most people spend on a rented property (based on our salary and including amortization). Furthermore, a 5% CHF Return would result in me paying down the mortgage instead of investing in the stock market. If rates are lower again, I can refinance the property - but sure I if you’re comfortable with paying more to sleep better, then so be it.
But it’s not just a “bit” more expensive - you’re paying 2x the amount for a 10y mortgage for example.
UBS is not better at guessing interest rates than anybody else, they could go up or they could go down.
Sure, I wouldn’t do that either, but one could move his savings rate (or in your case, the salary of your partner/part of that) into paying back the loan and getting an attractive risk free return.
As long as I am generating my company money, there is a 0% chance of me getting fired, besides a total dissolution of the company. My role is not a cost center, if they fire me, they lose money.
I imagine and I have health insurance for this and if you live in Switzerland, so do you.
This is just Doomerism - the chances of interest rates going beyond 5%, which didn’t even happen during 10%+ inflation periods in our neighboring countries, is very, very low. And again, you should be able to afford the property and then some, banks are very conservative with their loan calculations.
And again, not a bit - it’s 1.5-2x
Yeah, if I spent my money in that way, I’d also fix my mortgage I guess. Those are upper class problems I can’t relate to, I’m sorry.
This might be controversial, but imho this is a great experience for the kids and family - nothing in life is guaranteed, ever. Assuming he doesn’t need to sell the property and can still afford the gap between his next job, it’s a good opportunity to get the kids in the boat. Contrary to what most people think, I am not of the opinion that you need to pamper your kids and cushion them through the hard reality of life - “guys rates are up, no vacation this summer” - is actually a very good financial lesson for them imho. (again provided it’s not existentially critical) - so sorry to say, but this sounds a bit “soft” to me and I would not classify that as something I personally lose sleep over.
Sure, that is a good argument, but generally speaking, they are losing out on more money by essentially timing the market here - since stock returns higher than any realistic interest rate hike (at least long term).
The downside is that it costs money and can be considered as an active trade against the market. Nothing wrong with that, but I personally am not convinced - but I do agree that everyone’s life situation and risk tolerance and appetite is different. I have invested with a 1.3x leverage through the Ukraine crisis and didn’t sleep that bad, even though I was down a couple years worth of progress. Some people couldn’t handle that - fair point.
UBS tracking record for rates forecasting is disastrous since I follow it. They try to make realist take but almost want to sell you 10y mortgage.
As stated above short rates are lower than long rate so on a 40y time window SARON should almost always win. Anyway fixed rate for hedging are ok.
I am ok with that non fixed rate risk but don’t want to gamble with equities or options and only invest on ETF
There was a lot there to respond to but this made me shake my head the most.
Example: Autodesk: in 2026 it announced about 1,000 layoffs, largely aimed at customer-facing sales roles, even while raising its financial outlook.
Reminds me of that saying: the market can stay irrational longer than you can stay solvent
Anyway, i also have a significant part of my mortgage saron - no issue. Also have a sizable portion fixed and am perfectly comfortable woth that.
