With a fixed mortgage, the interest rate remains unchanged during the agreed term. Common terms range from two to ten years; depending on the provider, fifteen years or more may also be possible. Short terms carry the risk of renewal during a period of high-interest rates. Long terms protect against interest rate increases but limit flexibility and can lead to high costs if terminated early. Additionally, longer terms are generally, but not always, higher in interest and therefore more expensive. Hence, apart from the current interest level, possible changes such as a sale, a significant amortisation, retirement, or other life changes should be considered.
The interest rate of a SARON mortgage is based on the SARON. This reflects the average interest rate at which banks lend money to each other overnight on the Swiss money market. The bank adds a margin to this. As the SARON rises, so do financing costs. Depending on the provider, an interest cap can be agreed upon for an additional fee. Such a solution is referred to as a cap mortgage.
Many property owners divide their financing into several tranches with different terms or mortgage models. One part can be taken as a fixed mortgage, while another can be a SARON mortgage. This reduces the risk of having to renew the entire financing at an unfavorable time. However, different expiry dates can make changing providers challenging and reduce flexibility.
The development of mortgage interest rates cannot be predicted reliably. The SARON responds relatively directly to changes in the SNB's key interest rate. Fixed mortgage rates are more strongly oriented towards long-term capital market rates, already considering expectations about future key rates, inflation, and economic trends.
Comparing various providers is worthwhile, as interest rates and contract conditions can differ significantly. For fixed mortgages, interest rates and terms are particularly important, while for SARON mortgages, the margin, overall term, and the possibility of switching to a fixed mortgage matter. A longer overall term protects against short-term margin adjustments but binds clients longer to the provider. In both models, the conditions for early termination, especially any potential early repayment penalty, should also be checked.
Therefore, what matters is not just the currently cheapest interest rate, but financing that suits one's personal and financial situation in the long term.
Press contact:
HEV Schweiz
Markus Meier, Director HEV Schweiz
Tel.: +41/44/254'90'20
Mobile: +41/79/602'42'47
E-Mail: info@hev-schweiz.ch