What factors influence the development of mortgage rates?
Who plans to acquire a property, looks above all at the level of mortgage interest rates. Even small deviations can have a considerable impact on financing costs. The mortgages offered on the market do not only differ in terms of the offer of the respective bank. Mortgage rates in Switzerland also depend on the form of the loan and the duration of the term. In addition, the Swiss National Bank has a significant influence on interest rate developments through its monetary policy. Here you will learn in three steps the basic mechanisms that determine the level of mortgage interest rates.
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1. The banks' costs of raising funds
Private banks have no license to print money. They depend on the amount of money in circulation and the conditions under which fresh money is available. If conditions are favourable, interest rates for consumers are also low (low-interest phase). If interest rates rise for banks, they pass on the additional costs to consumers. The Swiss National Bank is responsible for this. Its decisions influence how interest rates in the money market develop. In doing so, the National Bank pursues the objective of maintaining price stability. On the other hand, it is not its task to ensure low mortgage rates for private consumers in Switzerland. In the following video, Stefan Heitmann, CEO of MoneyPark, explains why the offers of different mortgage providers can differ greatly:
2. Mortgage rates depend on the type of loan
In addition to the fixed-rate mortgage, banks also offer LIBOR mortgages and variable-rate mortgages with flexible interest rates. With a fixed-rate mortgage, the customer and the bank agree on a fixed interest rate at the beginning of the term. With variable-rate and LIBOR mortgages, the mortgage interest rates are adjusted to certain other rates. Which loan variant offers the lower mortgage rates cannot be said across the board. In recent years, the LIBOR mortgage has often offered the lowest interest rates on the market. However, this always depends on the situation on the credit market, the situation of the consumer and the conditions of the bank.
However, there are fundamental advantages and disadvantages to fixed and flexible mortgage interest rates. The fixed-rate mortgage offers the greatest planning security, and those who conclude a fixed-rate mortgage in a low-interest phase can benefit from it on a long-term basis. In addition, short mortgage terms generally have a positive effect on interest rates. With a LIBOR or variable-rate mortgage, customers can also benefit from falling interest rates during the loan period, but are exposed to the risk of having to bear higher costs due to rising interest rates. The variable mortgage offers the greatest flexibility, as banks generally only offer it in connection with a notice period, i.e. without a fixed term.
3. The influence of creditworthiness and own funds on mortgage interest rates
For all forms of mortgages, the financial situation of the customer affects the interest rate. On the one hand, it is important how much equity the customer brings in to finance the property. The ratio between mortgage and own funds is often referred to as loan-to-value ratio. On the other hand, the banks look at income in relation to expenditure. This is called affordability. Banks try to assess their risk on the basis of the loan-to-value ratio and affordability. A high risk entails a risk premium.
With our personal advice we help you to consider all factors and the various offers of the banks so that you can decide on the most lucrative interest rate.
Current mortgage rates
The displayed interest rates are the best rates currently available. Your personal interest rates may vary depending on LTV, affordability, mortgage amount and the location of the property.Calculate interest