Good news for all those who have financed a large part of their properties with mortgages, because according to the forecasts on the financial markets, interest rates are likely to remain low for some time to come.
Billions to support the economy
As the corona crisis is weighing heavily on the economy, many governments have created a veritable flood of money with loans, money supply expansion and bond repurchases. This is intended to prevent a collapse of the economy and keep the economic slump as small as possible. Nevertheless, the IMF Monetary Fund is forecasting a decline in gross domestic product (GDP) for Switzerland of around 6 percent this year; the State Secretariat for Economic Affairs (SECO) even expects a decline of 6.7 percent.
With these perspectives in mind, the Swiss Federal Council reacted early on and launched emergency loans worth billions and financial support programmes for the economy in Switzerland. At the beginning of June, the European Central Bank (ECB) decided to increase its Corona emergency bond purchase programme by 600 billion euros to 1.35 trillion, while leaving the key interest rate at the record low of 0 per cent.
Interest Rates To Remain Low
As a result, mortgage interest rates are likely to remain low for some time to come. A general increase in interest rates on the money markets remains a long way off for economic reasons alone. So the pressure on interest rates in Switzerland, too, remains high and is likely to increase.
Despite low long-term mortgage interest rates, many banks therefore continue to recommend at least partial financing of properties with money market mortgages (Libor), depending on risk tolerance.
Saron (Swiss Average Rate Overnight) replaces Libor
However, the days of the Libor (London Interbank Offered Rate) are numbered. This will be replaced by the Saron as basis for short-term mortgage interests in Switzerland. In order for the Saron to be applicable to money market mortgages, a working group of the National Bank (NAG) has devised seven variants to calculate a longer-term interest rate from the overnight rate.