Saturday , March 2 2024
Home / le News / Swiss rents set to rise after mortgage rate rise

Swiss rents set to rise after mortgage rate rise

Summary:
On 1 December 2023, Switzerland’s Federal Housing Office announced the reference mortgage interest rate for rental agreements will rise from 1.50% to 1.75%. © Denis Linine | Dreamstime.comThe reference rate is mentioned in many Swiss tenancy agreements. If the rate goes up landlords can increase rents. If the rate goes down tenants can demand lower rent. The rate is based on the average mortgage interest rate. Essentially, total mortgage interest paid divided by the total outstanding mortgage debt. This means the reference rate lags the most recent rates for new mortgages. Only when loans are refinanced do they enter the pool of outstanding mortgages and affect the volume weighted average interest rate. The average mortgage rate is then rounded to the nearest quarter of a

Topics:
Investec considers the following as important: , , ,

This could be interesting, too:

Investec writes No rise in Switzerland’s rent rate this quarter

Investec writes Switzerland’s marriage tax penalty back in the spotlight

Investec writes More than 17,000 drivers fined in a month on one Zurich street

Investec writes Higher Swiss pensions – voter support narrows

On 1 December 2023, Switzerland’s Federal Housing Office announced the reference mortgage interest rate for rental agreements will rise from 1.50% to 1.75%.

Swiss rents set to rise after mortgage rate rise
© Denis Linine | Dreamstime.com

The reference rate is mentioned in many Swiss tenancy agreements. If the rate goes up landlords can increase rents. If the rate goes down tenants can demand lower rent.

The rate is based on the average mortgage interest rate. Essentially, total mortgage interest paid divided by the total outstanding mortgage debt. This means the reference rate lags the most recent rates for new mortgages. Only when loans are refinanced do they enter the pool of outstanding mortgages and affect the volume weighted average interest rate.

The average mortgage rate is then rounded to the nearest quarter of a percentage point. This time the average mortgage rate was 1.69%, which rounds to 1.75%. Every quarter percentage point rise entitles the landlord to increase rent by 3%. The extent of any rise depends on the rate used to set current rent. If rent was set before 2 June 2017 then no rise is allowable, assuming the tenant has not used declining rates to gain rent reductions since. If it was set later then a 6% rise might be possible – the reference rate fell as low as 1.25% between March 2020 and March 2023, so a shift from 1.25% to 1.75% would allow for two hikes of 3%.

The reference rate will not go down until the a average mortgage rate hits 1.63%. This is unlikely to happen soon. As more mortgages are refinanced at current rates the average rate will continue to rise.

In addition to the change in the reference interest rate, other cost factors, such as a change in the national consumer price index (inflation), play a role in determining rent. Landlords can pass on 40% of inflation-based cost increases. Also higher maintenance and operating costs can sometimes be passed on.

The new rate applies from 2 December 2023. The next one will be announced on 1 March 2024.

More on this:
FHO press release (in French) – Take a 5 minute French test now

For more stories like this on Switzerland follow us on Facebook and Twitter.

About Investec
Investec
Investec is a distinctive Specialist Bank and Asset Manager. We provide a diverse range of financial products and services to our niche client base.

Leave a Reply

Your email address will not be published. Required fields are marked *