On June 1, the Federal Office for Housing confirmed that the reference interest rate for mortgages in Switzerland would be increasing from 1,25 to 1,5 percent. Along with showcasing how much the cost of buying a house has increased in recent years, the rise will also allow landlords to increase rents, including on tenants who have already signed rental contracts. Here's what you need to know.

What is the Swiss reference rate increase and how it will affect rental costs?

In a statement, the Swiss government announced that the reference interest rate will increase by 0,25 percentage points to 1,5 percent from June 2, 2023. The Swiss National Bank noted that they have already raised real interest rates significantly in recent months, so a rise in the reference rate was almost inevitable.

While also providing a price guide for mortgage providers, the reference rate is used to calculate how much landlords can increase or decrease rental costs. With this in mind, here’s what you need to know about the rise, who should expect to pay higher rents, and how tenants can appeal.

Who will have to pay higher rent?

The rental cost hike can be applied to anyone who started to rent a house or apartment in Switzerland after March 3, 2020 - the date when the reference rate was last lowered. Estimates vary, but the rental cost rise should apply to between 30 and 52 percent of all tenants in Switzerland.

Higher rental costs can also be passed on to anyone who has successfully applied for a rent reduction in Switzerland - although it’s important to bear in mind that those who started renting before February 6, 2017, and have not applied for a rent reduction, are still able to do so (as back then the rate was 1,75 percent). 

How much will the rent increase be?

The rise of 0,25 percentage points in the reference rate will allow landlords to raise rental costs by up to 3 percent. They are also able to top up this increase by compensating for up to 40 percent of the current inflation rate (around 1,04 percent, although this is subject to change). 

When will I know my rent has risen and when will higher rents kick in?

Those affected by the rental cost rise will have to be informed of the change in June via registered post. Landlords will be able to charge the higher rate from October 2023.

Can you appeal a rent rise in Switzerland?

In short, yes - although it will only be approved in certain circumstances. Speaking to 20 Minuten, the Zurich Tenants’ Association encouraged renters to analyse the rental cost rise as soon as it arrives in the post. "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 own local council," spokesperson Walter Angst explained.

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 which 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).

Is this the end of rental cost rises in Switzerland?

Sadly, according to 20 Minuten, June may not be the last time we see the reference interest rate in the headlines. Experts speaking to the newspaper predicted that another rise should be expected in December, meaning that overall rents could rise by as much as 10 percent in a year.

For more information about the reference rate rise, check out the official press release (in German).