Mortgage strategy with current geopolitical situation

Real Estate
1

Hello,

Regarding mortgage strategy, I am thinking of taking a SARON mortgage combined with one or two Fixed-rate mortgages with different terms.

This is in a nutshell what I got out from the discussions with the different mortgage companies :

Pension Fund

They seem to offer the best rates, but are also the most conservative when evaluating our creditworthiness. Compared to the two banks I talked to, they require the largest downpayment from us and on top of that 8’000 CHF amortization per year (indirect amortization via 3a accepted). The reason is that they also assess our financial situation by the time we retire at 65 and take this in their creditworthiness evaluation into account (which banks don’t do as we are still far away from retirement age). On the plus side, I believe they offer the best rates and it seems like they don’t care in which 3a we put our money into it (Finpension with 99% stocks seemed ok to them).
The SARON margin they apply is 0.7%, I believe it is hard to beat that. Fixed rate mortgages also look attractive but recently increased see below:

Rate froms February 2026

3y: 1.00%
4y: 1.05%
5y: 1.15%
7y: 1.30%
10y: 1. 50%

Rates from 30.03 .2026

3y: 1.20%
4y: 1.25%
5y: 1.30%
7y: 1.40%
10y: 1.50 %

Raiffeisen

They are definitely less restrictive than the pension fund. They could give us a bigger loan by about 100-130kCHF (maybe even a bit more) compared to the pension fund, therefore less of our own funds that are “blocked” in the house. Also, no amortization required. Their standard SARON-margin is between 1.0-1.1%. The advisor said that he could bring it down to 0.85% for us, maybe even 0.8%, but that seemed like the lower floor. Don’t think they will beat the 0.7% SARON margin proposed by the pension fund. The advisor was also honest and telling me they can not compete with the pension funds regarding the offered mortgages rates, but on the other hand they can offer to “accompany us financially in all our stages of our life”, which a pension fund can not do (that is not really a selling point for me). I have no idea what kind of fixed rates they offer and also not sure if I need to have all my banking stuff in Raiffeisen (including 3a pillars) in order to get preferential SARON margin and Fixed rates.

Migros

They are the less restrictive out of the three, but also compute the affordability quite differently from Raiffeisen and the Pension Fund. The max loan they could give us would be 220kCHF higher than the max loan from the pension fund.. Also amortization is not required. The official SARON-margin is 1.1%. The advisor told me the absolute minimum for the SARON margin they could offer would be 0.85%. They could also offer a discount of 0.3% (maybe even 0.35%) on their fixed rate mortgages, on the condition that we transfer all our financial assets to the Migros bank, which I am not so eager about. I assume stocks and 3a are also concerned and I would prefer to stay with FinPension for the 3a. Unlike Raiffeisen, Migros is showing their fixed rates mortgages on their websites and they are updated quite regularly. This is the evolution of their standard fixed rates over the last few weeks:

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If you deduct the 0.3% discount, you get rates that are about the same as those of the pension fund.

1) Both SARON margin and Fixed Rates look very competitive from the pension fund. Do you think any banks or insurance companies could come close to the offered rates of the Pension fund?

2) I am thinking of combining different mortgages with different terms. Ideally the terms should be chosen in such a way that at some point of time not too distant in the future they all expire at the same time and I have the possibility to switch to a different mortgage company (for instance combining 2Y, 3Y and 6Y mortgages => one could switch to a different mortgage company after 6 years). With the pension fund, this would be more difficult, since they don’t offer fixed term mortgages for 2-years, 6-years, 8-years and 9-years. Also, the SARON-mortgage of the pension fund has a unique term of 3 years.

3) The pension fund is a lot more conservative than the two banks both with proper funds requirements and required amortization. However, I don’t mind putting a bit more of our own funds into the house, since I don’t like to have a huge debt and I don’t feel comfortable with the prospect of having to pay one day high interest rates on a big loan. Also the required indirect amortization in the 3a pillar is irrelevant to us, since we pay out the maximum amount in the 3a since many years.

4) One reason not to accept the current offer of the pension fund are the 0.15% supplements for fixing the rates one year in advance. However, what is completely unclear to me are the next steps should we get the house. Will the real estate agency require that we commit relatively fast with one mortgage company and will we then be also stuck fixing the rates one year advance? I am just unsure how much freedom we have to see how fixed rates develop in the upcoming months before committing to a mortgage company. Anyone has gone through the whole process once they got the commitment from the owner to sell the house to you? What does it look like?

5) The reason why I am having all these thoughts are of course the current events in Iran. I think the prospect of having high inflation in 6-12 months is real should the war and resulting high oil prices persist in the upcoming weeks/months. How do you assess current geopolitical events and its effect on inflation and therefore on interest rates? Interestingly looking at the fixed rates of the migros bank, they seemed to have gone down a bit in the beginning of April compared t o the end of March.

6) Is there anything in particular I should clarify with the pension fund before I accept their offer?

7) What would you do if you were in my shoes?

Thanks for any insight!

PS: I am not looking to retire early any time soon, please take this into account.

2

If you can afford potential price flucations, going with saron is often the cheaper option ((Festhypothek oder Saron? So wählt man die richtige Hypothek | cash)). For longer timeframes you jut pay an “insurance” premium to hold that price. They are set in a way that the bank will win most of the time.
One of the biggest drawback of fixed mortgages is the reduced flexibility to sell the house when your life circumstance change (you will pay a hefty fine - if not all the interest owed). Also they will eventually just end, no one can tell what interest regime will be there when you renew.

Alternatively you can also get part in Saron and one part in fixed mortgage. This way you can secure a preferential saron margin when signing the initial contract (this will remain for the remainder of the contract) and later decide on how to balance between fixed and saron on renewal.

The worst option is actually to get multiple fixed mortgages over with different periods (e.g. on 3 years, one 8 year). Banks will often suggest that so you get a blended rate. But its the worst. Once once expires and the other is still running you have no leverage whatsover over the bank. You will just need to pay whatever they ask from you at that point.

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3

Would you share the pension fund name which is offering 0.7% margin on saron ?

I am in a similar situation, i am thinking about saron as well right now !

4

Hi IIpicone, thank you for your answer. Yes I know historically SARON has nearly always been better than fixed rates with a few exceptions in the early 90’s. However, I don’t feel like putting everything into SARON, because with a potential 5% interest rate with SARON I will probably lose sleep over. That is why I am thinking about taking a mix of SARON and fixed rates. Maybe 50% SARON and 50% in fixed rates.
About getting fixed rate mortgages with different periods, yes I know you are tied to the bank, this is why I had in mind to select terms in such a way that you can get out in a not-so-distant feature. For instance if you select 3Y and 6Y, you could basically get out after 6 years. In your exemple with 3Y an 8Y, it would be much more difficult since 8 is not a multiple of 3. So you would probably get out the earliest after 10 years with that setting (3Y+3Y+4Y for the first mortgage and 8Y+2Y for the second mortgage with a standard bank). One reason to use fixed mortgages with different terms is that also gives some flexibility to repay part of the debt when one of the mortgages expires, depending on our financial situation in a few years.

But maybe one strategy could also be to take only a SARON mortgage and then convert part of it into a fixed rate mortgage should the interest rates raise. What I am unsure is whether it is possible to convert only a part of the SARON mortgage into a fixed mortgage or if we are forced to convert the whole SARON into a fixed mortgage.

My main problem now is whether I should accept the offer of the pension fund offering me the old rates + 0.15% supplement for fixing the rates one year in advance without having really the opportunity to negotiate the rates with other financial institutions or whether I should wait it out but with the risk that fixed rates increase overall with the current mess in Iran. It is really difficult for me to judge the middle term consequences of the war in Iran on inflation and the potential higher interest rates. At the time of writing, the Donald has threatened to basically annihilate the whole country. We’ll have an answer tomorrow whether he’ll carry out his threats.

5

Sure, I can give you the name in a private message. However, I believe you need to be affiliated to the pension fund in order to contract a mortgage with them. Very likely you are affiliated to a different pension fund than I do, so maybe check with your own pension fund if they offer mortgages and at which rates.

6

Yes ! Please DM me the name ! Thank you !

7

I think that‘s the worst possible choice. It‘s like a panic sale after the stock market has fallen. If you are considering this, you should go with fixed rate from the beginning.

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8

I would like to, but I have no idea how to send a private message on this forum. Don’t know if it is even possible to send a private message?
I saw on your profile that you are located in Vaud, so very likely you are not affiliated to the same pension fund as I am and you would not be able to contract a mortgage with them (they give out mortgages only to people who are affiliated to them).

9

That is a fair point. It is also the reason why I was thinking of converting only a part of the SARON into a fixed mortagage (and not the whole SARON into a fixed mortgage). Buy yes, probably not a good idea either, you are probably stuck with a fixed rate mortgage which is too high.
I guess my initial strategy to split the loan 50% in SARON and 50% in fixed rate is still probably the best strategy. And if rates go up, I will just have to suck it up for a while with the SARON mortgage.

10

My view is simple, if rates are relatively low (for me, this is anythin <2%). Then I will look to fix for 10 years and sleep well at night.

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11

Similar situation rn. My plan is to do all saron and

  • Put aside the payment as if I have 10y to build up a buffer to use if rates rise.
  • Save more to get to a point where mortgage amount is lower than net worth.
12

On expiration oft the 3 year, the bank can give you wathever terms they like for the continuation and you must take. You can not go to another bank or negotiate better terms. Just not worth it. Doesnt matter 6 or 8 imo.

If interest rates in Switzerland really go to 5% , you might eventually hit a fix rate renewal in a high interest phase as well paying even more and missing on the down trend later.

Fixing rates in advance adds even more as insurance premiums you keep paying over the long term.

Ultimately you need to feel good with the arrangement. If you sleep better with a fixed rated and accept likely paying more longterm and are fine renegotiating renewal terms every few years. Thats perfectly fine i guess.

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13

You need to have level 1 (basic) to send private messages. This is a feature of the forum software (Disourse). Here you can find a general description. Below are a screenshot of your profile and my profile (all in German, so ‘basic = Anwärter’).

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14

Thanks, Dr. Pi also gave me the rights to send private messages, all fine now.

15

Ok, that is a fair point. After all the most important thing with financial decisions is how well you sleep at night.
Just with a 10-year fixed rate mortgage, you might have to pay some hefty penalties should you exit earlier than planned for whatever reasons (life is full of surprises after all). Is this something you considered?

16

Yes that might be true for banks, but probably less with pension funds. I checked websites of different banks and pension funds. With banks it is often very difficult to find information about fixed rates and SARON margins (it is often on request), whereas with pension funds you can find all the information on their websites, they are way more transparent than banks IMO. Also the extra charge for fixing rates in advance is clearly stated on the pension fund website, whereas I had to ask the banks explicitly about the extra charge for fixing in advance and I got only relatively vague answers.
From what I could gather, Pension funds offer very competitive rates compared to banks, but there is also a lot less room for negotiations than with banks. I had a while ago this discussion with our advisor at the pension fund, who previously worked in a big bank, who told me that with the pension fund there is not a lot of room for negotiation whereas with a bank you have to negotiate hard with them.
I guess the point of having fixed rates tranches with different terms is that if you renew one of the tranches at bad time point with high interest rates, you can still limit the damage by not having to renew the whole loan at a very bad rate. But of course you give up some negotation power in exchange.

17

Honestly, havent looked into pensionfunds as mortgage lenders. But seems to be a savvy option. Particular for fixed term contracts with no complex situations. Thanks for that input.
If the fixed rates are always public and there is realy no negotiation room, then there is not much to say against fixed rates with different maturities.

18

Hi! Just my two cents :négociation is easier with more weight. If you split, they will have the advantage longer and more significantly than you will to negociate rates over the life of your mortgage. Can be stressful, but saron or no, but I’ll never split again. I strongly recommend to not split and go shorter duration when the rates are higher and longer when their lower, getting to 66% asap to stop amortisation. Way more options for you rather than the bank.

Backstory : I bought my apartment from my father in law in 2010. At the same time he sold another to his son and we negotiated all together with the bank. This was signifiant and we had a great (family) banker at the time

I also got a good trade off with no down payment (since the « family price » was significantly below market value) and I started immediately with indirect and was allowed to continue to invest my 3a (more limited at the time but still worthwhile)

However I didn’t know I could’ve merged then his set up of 4 mortgages split over different durations and when my banker retired I had to fight back against a lot of « new policies » pushed on me about the 3a investments (I had to really fight to avoid them making me convert to « their » funds with crap options)

Today I’m on track, invested to increase its value while reducing a bit the debt so I’m overall below the 66% threshold so no amortisation and all 3a investments on « growth » rather than « safe for the bank » …overall I timed well as last two are on average 1.22% fixed until 2028 and I’ll fix their end dates to the same date next négociation and merge the one after that…let’s see how many years I fix depending on the market 12-18 months before. Simple is easiest to manage in my opinion - I feel more risk with multiple tranches.

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19

Contrarian voice here - while I generally agree with not having multiple tranches ‘fixed’ due to poorer negotiation position when a tranche needs to be redecided/negotiated, I’ve taken a different approach

  • part of mortgage is SARON
  • part is fixed (10 years), we’re amortizing part of this during the first 5 years
  • part is fixed 7 years

In Switzerland interest rates are very low in any case so I am very comfortable to have longer fixed periods and thereby make it easier to sleep at night. Sure, I could be ‘greedy’ and try to get/wait for an even lower fixed rate but count your blessings with already excellent rates is my view. In any case, when the 7 years mortgage is due for renewal, the option I’m fine with is just converting to SARON or paying it off entirely (or a mix of these, until the 10 year mortgage is due for renewal) thus not necessarily a hard negotiation point with bank.

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20

I’m on partial fixed below 1% and partial SARON. As the rates rose in 2022 did a bit of amortization to reduce some of the SARON.

once my fixed comes to term I’m going 100% SARON and will shop around. Keep a bit of money sidelined to amortize more of rates increase.

I know this is Switzerland but I believe the world governments have a lot of debt and will suffer if they raise rates too high so I am not overly concerned with rate hikes.

I could see inflation being a problem but the easy solution to that is to let the general public get squeezed on food, health care, transportation etc…

This will only continue the wealth inequality but that’s the way I see it, and if that all happens I see the asset prices moving up too as the rich keep buying assets to avoid the currency devaluations

In which case holding mortgage dies actually good for us

Main risk is the strength of CHF and how SNB will react to it

Good luck!

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