SARON Mortgage - bank margin

It’s the ratio between your expenses (i.e. cost of borrowing + required redemption + maintenance cost and other liabilities you might have) and your income (gross salary + bonus with some discount + other income sources).

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We are in a transition period right now since SARON rates went positive again and some offers are still displayed with 0% SARON (for instance the viac one) while others are reflecting the current SARON rate of 0.45%. At the end to evaluate a SARON offer you need to ask for the margin instead of the total rate you get because they might trick you in believing you’ll get a 0.55% while in two months you will be paying 1% ^^.

I suppose once you open a SARON mortgage (and I see that they come with varying minimum length, e.g., Postfinance has 3 years minimum, while UBS has a version with 6 months minimum duration) they can change their margin? Maybe they can do it only 3 months or so, but they can change it, right?

required redemption == amortisation?

No the margin is contractual in a SARON tranche. The base rate changes every 3 months but the margin will remain constant for the duration of the SARON contract. Banks offer various SARON contract duration, I guess UBS it’s 3 to 5 years, Credit Agricole it’s 2 years.

Yes indeed, as per the rules you need to bring your equity to 33.3% within 15 years or latest at retirement age.

I have been talking about margins.

At the moment of writing, the final SARON rate offered by Credit Suisse is 1.54% for a 3Y contract (based on my my personal data on the Valuu platform). This implies that their margin is clearly above 1%. It’s the least attractive offer I have got so far.

As explained before, it’s getting 0.55 out of UBS that impresses me, because their standard rates start on the high side. I have never said that finding 0.6% (elsewhere) was out of the question, I even mentioned a 0.59% offer readily available from the BCGE.

Maybe I didn’t make it clear enough, but Key4 is owned by UBS, it’s not UBS itself. With Key4 you won’t be walking into an UBS branch and negotiate anything. Think of it as kind of Wingo/Swisscom.

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The conditions are clearly stated on the key4 Website:
Zurich Area, 500k loan, 24% affordability, 50%LTV, payout 26.12.22

My 0.5% I got are actually with UBS, but negotiated in August 21 for start date January 22.

I think wen negotiating SARON always talk about bank margin. How do you interpret

There aint no such thing as a SARON rate aver 3y. You want to know from your bank:

  • how do they compute the compounded Saron (there is no exact rule, only 7suggestions from the SNB)

  • how much is the bank margin

And yes, it is possible to discuss the bank margin. But sure it helps to be a good risk for them.

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In this context, 3 years refers to the duration of the contract. During this period, you may have the option to convert your mortgage to a fixed term offer from the same bank but you won’t be able to switch to another bank or partner.

UBS owns Key4, no question about that. However, offers shown to Key4 customers are not limited to UBS, there are other banks and pension funds participating.

Just like Valuu is operated by Postfinance but shows offers from many of their partners and competitors. That’s why I said that we are not sure that the best conditions advertised on the website are actually offered by UBS.

That’s why they split the rate: the 0.56% is Key4’s margin. The rest could be provided by anyone as you say. In the end, I don’t really care if it’s UBS that’s lending me the money, their pension fund, or someone else. As long as I get the mortgage.

Perhaps I was wrong from the start… I assumed that the financial institution behind the offer would be revealed at some point and become the actual contracting party. In that scenario, key4 was just some kind of facilitator and wouldn’t take any margin, maybe a commission for bringing in a new customer.

You are right that the financial institution behind is revealed, but the contractor for the duration of the whole process remains Key4, so it’s not just a one-time commission. You also need a UBS account in order to pay interests.

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