The average interest rate quoted on mortgages in Switzerland has dropped by almost half in the last two years, a report from Moneyland has found. With the alpine nation recording its lowest rate of inflation for over three years in October, there is hope that financial relief is finally coming down the track for both homeowners and renters.

Mortgage interest rates in Switzerland continue to plummet

According to Moneyland expert Felix Oeschger, the average interest rate for a 10-year fixed-rate mortgage in Switzerland now stands at 1,74 percent. Having dropped to a two-year low back in the summer, the findings now mean that rates have almost halved since their peak in 2022 when they stood at 3,35 percent.

The lower rates extend across the Swiss housing market, with five-year (1,58 percent) and two-year deals (1,52 percent) costing less. While they still cost more at 1,9 percent, rates quoted on flexible Saron mortgages are also lower than they were.

However, there is good news on the horizon for people who have bought a home with Saron mortgages - which are tied to up-to-date key interest rates. Moneyland now predicts that the Swiss National Bank will cut the key interest rate from 1 to 0,75 percent in December and then on to 0,5 percent in March 2025. 

Oeschger explained that “the expected interest rate cuts by the SNB are currently largely priced into the interest rates for fixed-rate mortgages,” meaning that Saron mortgages could become cheaper than fixed-rate deals in the coming months.

Low inflation and interest rates buoy hopes of rent reductions in Switzerland

The news follows the latest data from the Federal Statistical Office, which noted that annual inflation in Switzerland fell to 0,6 percent in October, the lowest rate seen since June 2021. This has buoyed hopes that alongside mortgages getting cheaper, real rises in workers’ salaries are also on the cards.

What’s more, with mortgage rates falling, the Federal Housing Office is likely to cut the reference interest rate, meaning a majority of those who rent a house or apartment in Switzerland will be able to apply for a rent reduction. This was confirmed by a recent study from Zürcher Kantonalbank, which predicted that the cost of pre-existing rental contracts would fall by the middle of 2025 at the latest.

Swiss housing market still vulnerable to shocks from abroad

However, Moneyland admitted that factors beyond Switzerland’s borders could darken this rose-tinted picture. “There are major economic and geopolitical uncertainties, such as those surrounding the US elections, which could lead to either a further decline or a renewed increase in mortgage interest rates,” Oeschger wrote.