The Swiss National Bank cut its key interest rate by 25 basis points to 1.0 percent on September 26, 2024. It is generally expected that two further interest rate cuts will be decided, so that the SNB key interest rate will be 0.5 percent in March 2025.
This essentially means:
- On the financing side, money market mortgages are continuing to gain ground. The price trend for owner-occupied homes is being supported and the transaction market for multi-family homes is likely to gain momentum.
- The reference interest rate is expected to fall by March 2025 at the latest, but this will only slightly slow down rent price inflation. Buying is becoming more attractive than renting.
Mortgages as of October 2024
Saron mortgages become 25 basis points cheaper, as they usually follow the movements of the key interest rate to the same extent.
The interest rate cut is already priced in for fixed-rate mortgages, so we do not expect any further reductions. The interest rate for ten-year fixed-rate mortgages is currently so low that they represent the cheapest financing option over a ten-year term. This is unlikely to change next year.
Will the interest rate cut stimulate the transaction market for
investment properties?
Multi-family houses are likely to increase in the coming quarters.
low single-digit percentage range. However, the price development will be driven by rising rents and not interest rates. Although returns are still relatively low compared to interest rates, we still expect a clear recovery and more demand, especially from institutional investors.
Is a relapse into negative interest rates conceivable?
Three key interest rate cuts are predicted: Is there even a risk of a relapse
into the world of negative interest rates? The Swiss National Bank is under pressure: Inflation is falling too quickly – and the franc could become too strong.
Switzerland could return to pre-corona normality. Back then, inflation was negative for many years and the Swiss National Bank (SNB) had to fight against it with a key interest rate of minus 0.75 percent. Only Corona brought inflation back and with it liberation from the topsy-turvy world of negative interest rates.
Now there is a risk of a relapse. The bank J. Safra Sarasin warns of this risk in a new report. Not much more can happen, otherwise it will fall back below the zero percent line and the SNB would be forced to act. "It would have to resort to very low key interest rates - possibly even negative ones."
Our conclusion:
The changes ahead promise exciting times for property owners and investors. We do not yet see negative interest rates, but the current situation forces us all to remain vigilant to market movements.
A reduction in the reference interest rate is on the cards at the end of the first quarter of 2025. After many quarters of rising interest rates, there will probably be a countermovement and, due to the strong Swiss franc, the National Bank will be at the forefront of monitoring the currency market and taking action accordingly.
We are happy to answer any further questions you may have or to provide a more in-depth analysis of your individual situation at any time.
Best regards
Your Tekton Real Estate Team