Current economic outlook

Status as at: 24.06.2024
Editorial deadline: 25.06.2024

Saron mortgages became even more attractive in mid-June after the Swiss National Bank’s (SNB) second interest rate cut. With a policy rate  Policy rates are interest rates set by central banks and are key monetary policy instruments. Policy rates determine the interest rate at which commercial banks can borrow liquidity from central banks. As a result, most short-term interest rates in an economy fluctuate with policy rates. of 1.25 percent, money market interest rates now stand at the level of inflation rates again. This is remarkably low by historical comparison. As another sharp rise in inflation  Inflation is the sustained rise in the general price level for goods and services in an economy over a particular period of time. When the price level rises, the purchasing power of money falls, i.e. fewer goods and services can be bought with the same amount of money as before. is not expected, the conditions for stability on the Swiss interest market appear to have been created.

The fact that Swiss inflation has reentered the range equated with price stability is also due to our weak economic performance. Per capita income in Switzerland has not risen for over two and a half years – the result of weak global demand for industrial goods and the economic weakness of our northern neighbour Germany. This headwind looks set to hold back Swiss economic growth into the coming winter.

A weak economy  The economy refers to a country’s current economic situation and reflects changes and fluctuations in economic activity. Sooner or later, upturns are followed by downturns, which is known as an economic cycle. A strong economy means good economic performance and vice versa. can also lead to low capital market interest rates  Capital market interest rates have a term of over one year. They play a decisive role in the cost of long-term financing. for extended periods and, in turn, attractive interest rates on long-term fixed-rate mortgages. Interest rates on 10-year Swiss federal government bonds, for example, currently stand at just over 0.5 percent. We believe that this may be just a temporary development. If the economy picks up in winter, a slight rise in capital market interest rates may be expected.

Interest rate forecast for PostFinance mortgages

The table shows our mortgage interest rate forecast for various terms. We do not expect a significant change for the time being. As inflation is still falling, the SNB may even cut interest rates again in the autumn, which would lead to a further reduction in Saron interest rates. Expectations of another cut to interest rates could cause long-term mortgages to trend sideways. If the economy improves this year, however, interest rates on fixed-rate mortgages would then be expected to rise.

Development of mortgage rates in Switzerland

With the relaxation of monetary policy after the global financial crisis, both the short-term Saron rate and medium- and long-term mortgage rates have fallen. It was not until the SNB tightened its monetary policy again in response to the sharp rise in inflation during the COVID-19 pandemic that the level of interest rates rose significantly again. In March and June 2024, however, the SNB lowered its policy rate again. These and other expected relaxation steps were gratefully received on the capital market, with interest on long-term mortgages falling.

A Saron or fixed-rate mortgage

PostFinance’s attractiveness index indicates that fixed-rate mortgages have become less attractive again. In particular, the SNB’s decision to lower its policy rates twice this year is making short-term money market financing  Money market financing is available for a term of up to a year. solutions, such as Saron mortgages, increasingly attractive. However, fixed-rate mortgages are currently still more attractive than short-term money market financing options due to historically low capital market interest rates, although this may change in the foreseeable future. We expect capital market interest rates to rise slightly again from winter, which would increase the finance charges of fixed-rate mortgages once more. Another cut to policy rates in the autumn is a very real possibility, and this would make fixed-rate mortgages even less attractive.

Interest rate forecast for download