On December 1, the Federal Housing Office (BWO) increased the reference rate for Swiss mortgages, meaning that a large number of people renting a house or apartment in Switzerland will soon face higher costs. Here’s what you need to know about the decision, how much rental costs will increase and what rights tenants have to appeal.

Guide to the reference interest rate rise in Switzerland 

In a statement, the Federal Housing Office confirmed that the reference interest rate will be increasing from 1,5 to 1,75 percent. This follows a previous rise announced in June 2023, when the rate increased from 1,25 to 1,5 percent.

The reference interest rate is designed to be a guide to what the average interest rate should be for a new mortgage. Since 2008, it has also been used to determine how much landlords are able to raise rents on their tenants, regardless of their rental contract. In short, when the rate rises, landlords can raise rents, and when it falls, tenants can apply for a rent reduction.

For many the system is justified, as many landlords use mortgages to pay for the homes they own and then rent. If rental costs were fixed or unable to rise in line with mortgage interest rates, it would leave landlords vulnerable.

Who will face higher rental costs in Switzerland?

The rental cost rise will apply to all tenants who have applied for a rent reduction or have rented a new house or apartment since June 2017. While estimates vary, this will mean that around half the renting population will face higher costs. Those who started to rent their property between June 2, 2015 and June 2, 2017 - and, crucially, have never applied for or had a rent reduction - will not be affected by the rise.

Technically, so long as they have not applied for or had one, anyone who started to rent their home before March 3, 2015, is still eligible for a rent reduction - as back then the reference interest rate stood at 2 percent. The rate that currently applies to you should be clearly stated in your rental contract. If it is lower than 1,75 percent, you will likely face higher rents. 

How much will rents rise by?

With an increase of 0,25 percent, landlords can increase their rents by 3 percent. However, Swiss Tennants’ Association vice president Michael Töngi told 20 Minuten that rental increases could be as high as 6 percent in some cases. The rise will only affect the net rent of the property, not any additional costs and while landlords are not required to raise rents, it is in their financial interest to do so.

The higher rents will apply from the next possible termination date for rental contracts. While this date varies by canton, for most this will be on April 1, 2024. Renters must be informed of the rent increase via registered ahead of time by post.

Can I appeal a rent rise in Switzerland?

While tenants can appeal a rent rise, it will only be approved in limited circumstances. Töngi advised people to carefully analyse the rental cost rise as soon as it arrives. "If it turns out that the increase was not calculated correctly, you can contest it within 30 days of receiving the official notification at the arbitration authority of your local council," noted Tennants’ Association spokesperson Walter Angst back in June.

While only a factor in a limited number of circumstances - mainly those who have just moved into a new home - it is also important to check whether the current rent being charged is already sufficient. This could be the case for newly built apartments, newly renovated apartments and dwellings that have been recently re-rented with a significantly higher price. You can check whether you are being overcharged using the Zurich Tenants’ Association's price calculator (in German).

Will this be the last of the rental cost rises?

Unfortunately, Töngi noted this wouldn’t be the end of rental cost rises, predicting that the reference rate would likely rise again on March 1, 2024. Indeed, when announcing their limited measures to try and cushion the situation, the Swiss government predicted that rental costs may temporarily rise by 15 percent before the reference rate begins to fall.

What’s more, the vice president said it is unclear when the reference interest rate will fall, allowing tenants to apply for a much-needed rent decrease. He explained that the BWO calculation is based on both short and long-term mortgage rates, meaning it is hard to tell when lower rates might kick in.

Swiss reference rate increase met with dismay

The announcement was met with dismay from unions and some political parties, with the Swiss Federation of Trade Unions writing that the rise adds to an already “unbearable” situation on the housing market. They said that with the recent rise in the cost of health insurance, reforms to the pension system and now this, the government had created a trifecta that only served to make every resident of Switzerland worse off financially.

For their part, the Young Socialists (Juso) wrote that the current rental system is not fit for purpose. “Only if we take the land away from profit and speculation can we guarantee affordable rents again,” claimed Juso president Nicola Siegrist. For more information about the reference rate rise, check out the Federal Housing Office website.