Not too concerned myself. Appreciation has raised the ownership rate of objects massively these past years so most mortgages will not be at risk I think, except maybe the people who bought at stretched valuations for a stretched financing during the last 2 years.
according to this article, if 10 percent of the morgages will default / not pay, that’s more then the capitalization of CS and UBS together (which also says CS is instantly bankrupt ).
So we might face some huge walls of worries rather sooner (2023) than later (2024+).
Yeah sure but why should 10% of them default at a rate slightly above 1% if they all need to be able to sustain 5%++ (++ because paying 33% of your income towards mortgage does not make you default either directly)…
I think the market may cool down but so far it seems not dramatic to me.
I think the point is that even if you could pay 5% it’s a total different story. In my case if I remember the calculations well the monthly cost at 5% would be 3000 CHF. While it’s not impossible to pay that it would still mean a huge impact for us. my saving rate would decrease significantly. However, this is the reason of the 3a investment that we did. To pay back partially the mortgage in case the interests raises significantly at the due date (2027). Of course if you spent everything already now on blackjack and hookers you might face an issue
yeah they should be able to sustain at 5%, but I bet that most of the home owners in the last 5 years never would have bought property at 2 or 3% of interest, they would still be happily renting.
If it indeed goes to 3+% on the SARON in the next years, I expect a lot of market activity from people who on paper could afford the house, but don’t want to keep pumping money into interest (instead of amortization) and will rather go back renting.
That will e interesting indeed. I think it’s one thing to reconsider buying a house now with 3% or more but it’s another thing to actually sell your house where you live in and have converted it into your home. But yes it will be definitely interesting in the next year maybe there will be some good buy opportunities (if you still have money)
I am going to renew my mortgage next year. My 800’000 CHF debt at 3% interest rate would cost about 2000 per month without amortization.
Of course it is depressing when you got used to 1.3%, but it’s not nearly as horrible as it looks. In many cases, renting a similar house or apartment would still cost a lot more than that, especially in a high interest environment. Moreover, direct or indirect amortization is still an option. Unless you are confident to get a solid 7 or 10% yearly return on the stock market, you may still be on the right track.
It of course depends on what properties are available in your location. I might be wrong but it seemed that renting good properties at decent prices was generally quite difficult, glad to learn that it isn’t the case anymore.
The “higher tax due to owning” should be compensated by the fact that mortgage interest is subtracted from your income.
Opportunity cost is also a subjective matter, your property may also gain or lose value over time. If you have the stock market in mind, your returns may or may not match your expectation. As an example. if you started investing in 2021, you are probably facing some serious headwind. If you have benefited from years of low mortgage rates, that should be taken into account too.
I am just answering on opportunity cost, I am not willing to resurrect the real estate VS VT debate, both approaches are not exclusive and which option is better is mostly opinion-based anyway.
In the cases I know from family and friends owning a house, the income due to “Eigenmietwert” was always higher than mortgage interest and maintenance cost deductions, easily resulting in 4-5k higher taxes a year.
I also don’t want to resurrect the renting vs. buying debate, there’s anyway a separate topic for that.
Seems like a lot but I wouldn’t reject your argument, I heard that the “Eigenmietwert” or “valeur locative” applied to a property can come close to the actual renting value in some regions.
Anyway, I am sure still sure that owning can be cheaper than renting in many cases despite the higher interest rate. Sorry for not having expressed my opinion in a more conservative manner.
Well Well Well… it really is nice to look at some comments made 1 year ago, and now here we are.
High interest sucking the credit out of everything. I am still surprised how the average Joe does not know what will come. I have to renew at the end of 2024, so the big picture might be a bit clearer till then, but it will suck to pay 3x what i pay now.
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