Mortgage rates in Switzerland

I guess that’s depends also on your affordability and your wealth. Those interest rates are too low in my case.

Checking the interest rates forecast (below), they look interest rates will go up (not SARON). Why not SARON and only the fixed? Does it means it’s better to secure a low rate for 8 years at 0.8%?

We can handle the market fluctuations and we have a good saving rate, but still not sure what to do

You can‘t predict the future. AFAIK in the past SARON or Libor ended always cheaper

How do you know they were cheaper? Do you know where to check historical data comparing saron vs fixed?

Fixed rate mortgages are like insurance. You pay for security. It will always be more expensive than Libor/Saron.

If you are able to take the risk of being invested in the stock market, you should always go with Saron IMO.

I disagree with this analogy. The fixed rate loan insures you against variable monthly cost. There is no such risk with holding stock. It’s more like buying FX options to hedge currency risk (e.g. you’re a company that makes sales in foreign currency, but pays salaries in the local currency). Or like taking health insurance. You wouldn’t say something like “if you’re a healthy guy, it doesn’t make sense to get health insurance”.

I would say, it only makes sense not to take insurance if you’re rich enough to cover whatever losses might occur and if it would not “kill” you financially. Otherwise, you’re making a gamble. Of course, with the fixed rate the bank charges a premium.

If you get a fixed rate of 0.6%, then how much room is there for SARON to go even lower? I asked if a mortgage rate can go negative. But on the other hand, the possible rise to 3 or 5% is not out of question.

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When you need to pick the mortgage, yes SARON is always cheaper. But at the moment it won’t go down, the 0.6% it’s the minimum, is the margin of the bank, isn’t it? it can only go up. Why you say it’s always cheaper? Long term as well?

4 years at 0.6% and then another 4 years at 1% will be the same than 8 years at 0.8% (indirect amortization). Chances that it goes up more than 1% during the next 8 years? Maybe high? Of course, nobody knows, but it’s very low now

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Nowadays, the interest rate curve is incredibly flat - a 10y fixed mortgage is not more expensive than a 6y fixed or a Saron mortgage. You can choose to be able to plan for the next 10y or to take an option, where the interest rates could rise in the next years. Always depending, what you are expecting.

When I worked at the bank couple of years ago, the interest yield curve was linear. Nowadays it even makes no sense to split up the mortgage in different terms, because the average cost effect is too low. Of course, if you have a clear exit strategy, split up your mortgage. But this is another topic.

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Could still go down to 0%. Sounds crazy now, but we’ll see.

All this talk is similiar to the “Valuations of stocks are so high, they can only go down from here, so I’m waiting for the crash to invest”.

I’m not saying that you’ll end up paying less interest with Saron in the next 10 years. But you will for sure over the next 20-40 years.

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What do you mean :blush:
I got just 0.02% discount and they mentioned that usually you get just what they offer if you don’t complain

I would do more calculation before go with that offer…of course if you think that we won’t have inflation, it could be a good deal

What’s the advantage of the bank then?

I got some informations from people who had mortgages the past 25 years, and some friends in banking confirmed it.

Since I got an offer für 0.5 SARON I am looking for arguments to negotiate. For that reason I tried to estimate the banks profit for SARON vs 8 yrs. Are these thoughts correct?:

The banks profit is: (interest rate paid by client) - (interest rate to pay by the bank for refinancing).

I make 2 examples (source for refinancing cost: VZ Finanzportal - VZ VermögensZentrum)

SARON @ 0.5%

(0.5%) - (-0.73%) = 1.23%

UBS 8yr @ 0.8%

(0.8%) - (-0.17%) = 0.97%

The bank gets 0.26% more profit when selling a 8yrs mortgage, if SARON doesnt move for 8 years.

How much do you estimate the SNB Leitzins to climb in the next year?

Take into account that banks prefer longterm mortgages. Better to earn less for 8 years than more for 12 months and always facing the risk of losing the customer due to better rates from other banks.

0.5% Saron is already a huge offer. I only know people that work in a bank who got such a low rate.

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You can get Saron for 0.44% at https://valuu.ch

Rates are not the same for everyone.
Depends on the object and one’s financial situation.

When I tried Valuu last year, I got 1 offer only because I am self-employed.

In the end we went with a bank which was 0.2 cheaper than Valuu.

You’re right, there is a little asterisk down there:

  • Zinssätze für beste Bonität (digitaler Abschluss). Diese Angaben haben rein informativen Charakter und sind unverbindlich.

Your mileage may vary.

So in the end it will be 0.65-0.85% Saron for 95% of the clients.

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I just got offered a Festhypotheke split in two like that: 70% in 10y mortgage at 1.0% and 30% in 5y mortgage at 0.7%, so I was wondering what is the advantage for me for this split? As advantage I see the average cost effect of 0.91% but you mention that the average cost effect is low… Still on 1mio mortgage this average cost effect is interesting, don’t you think?

Then you mention it could be useful if you have a clear exit strategy. Do you have an example of such a strategy?

I wouldn’t do that. Because you are attached to the bank, you could change the bank in 10 years if the 5 years is extended for another 5.

Maybe after the first 5 years, you will get very bad offer for 5 years. So you don’t pick it :slight_smile: and then it’s difficult to sync the mortgages. In case you want to change bank for any reason

I think is just less flexible than just 1 mortgage or SARON

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I see, thanks for explaining the details. I missed that point that having a mortgage split in two with a bank makes it more difficult to switch to another bank and that’s probably the reason why my “main” bank made me this specific offer with the mortgage split in two.

I’ll probably just ask them for a single mortgage of 10y at 1.0% fixed. That would also keep things simple.

SARON is very tempting as they offered a 0.6% rate on 10y but I really don’t like the fact that the rate could change anytime, it makes things difficult to plan, especially in terms of FIRE. So I am excluding the SARON mortgage option.

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The mortgages are also often split because the 1st one can’t exceed the 66% of the value of the house. All parts exceeding the 66% need to be amortized within 15 years and therefore usually go to the 2nd mortgage.

Right, and these 66% is calculated on the the value of the house that the bank has valued, or is it the real price of the house which one is buying for?

In that case if I need to have a mortgage split in two because of legal reasons (66% rule) I guess I could simply ask for two parts with the same expiration time (10y) that should make it easier to change bank or re-negotiate a new mortgage after 10years.