While the Swiss Federal Housing Office has for the time being elected to keep the reference interest rate, which is used to calculate rents in Switzerland, stable at 1,5 percent, the office’s head has said that he firmly expects rents to increase in the near future. 

BWO: Rents in Switzerland could rise 15 percent by 2026

Speaking in an interview with Blick, Martin Tschirren, head of the Federal Housing Office (BWO) said that he expected the reference interest rate to increase again in winter - either in December 2023 or in March 2024 - and that it was “entirely possible” that another increase would come not too long after that. 

As he explained, for every quarter of a percentage point by which the reference rate increases, landlords in Switzerland can increase their rents by 3 percent. They are also allowed to add up to 40 percent for inflation and general cost increases, leading Tschirren to conclude that rent increases of over 15 percent are possible between now and 2026. 

He added that the interest rate was being further pushed up by the decline in construction activity, high demand for housing, and rising prices for energy and building materials. 

Reference interest rate rose for first time in June 2023

Last Friday, the BWO announced that it was maintaining the reference interest rate - which is calculated as an average of all the interest rates applied to mortgages in Switzerland for more than 300 million francs - at 1,5 percent. Since first being introduced in 2008, the rate has fallen continuously, reaching a low point of 1,25 percent in March 2023. In June 2023 it was raised for the first time, to 1,5 percent. 

The benchmark rate means that, when mortgage interest rates rise, landlords can pass these costs onto their tenants. At the same time, if the rate falls, tenants can request a rent reduction from their landlords. 

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