Mortgage rates set to rise in Switzerland

Mortgage rates at each of Switzerland’s major banks are on the rise in Switzerland, despite the Swiss federal reserve not yet raising rates.

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Mortgage costs are on the rise in Switzerland. Photo by Joshua Mayo on Unsplash

If you would like to purchase a property in the near future, you might want to think twice: Swiss banks are significantly increasing the interest rates for fixed-rate mortgages.

For instance, according to Switzerland’s Tages-Anzeiger newspaper, interest rates for a five-year mortgage at the Luzerner Kantonalbank rose by 0.19 percent to 1.4 percent; the seven-year fixed-rate mortgage at the same bank now costs 1.51 instead of 1.4 percent.

EXPLAINED: The hidden costs of owning a home in Switzerland

The trend is the same at other banks as well: Raiffeisenbank charges 1.84 percent for a fixed-rate, 10-year mortgage; Credit Suisse 1.77 percent, and Zürcher Kantonalbank 1.7 percent.

As a comparison, at the beginning of 2021, a 10-year mortgage cost 1.1 percent on average across the country.

Why are rates on the rise?

The increase is somewhat surprising considering that the Swiss National Bank has not yet decided to raise its rates, which are a usual precursor to the banks following suit.

Switzerland’s commercial banks however believe that rate rises are just around the corner, with Credit Suisse expecting the SNB to increase rates by 0.5 percent in total in two separate increases in the coming year.

EXPLAINED: Which banks are best for foreigners in Switzerland?

These changes look set to come about due to a gradual increase in inflation, as well as other national banks deciding to raise their rates.

Inflation is on the rise across the world due to increases in energy prices and supply problems as a result of the Covid pandemic.

The European Central Bank is expected to raise its rates in the coming year, as are several national counterparts.

READ MORE: How to protect your savings against inflation in Switzerland

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How Switzerland’s Covid switch to card has made things more expensive

Finally, you can now pay in Switzerland with card at plenty of shops and retailers, although the change is placing upward pressure on costs of living.

How Switzerland’s Covid switch to card has made things more expensive

For many, one of the few silver linings of the Covid pandemic was a final push in the direction of card payments. 

Unlike just two years ago, it is now possible to pay with cards rather than cash at a wide array of shops, stores and businesses all across the country. 

However, what we’ve gained in terms of convenience we may be paying for – quite literally. 

READ MORE: How the cost of living will change in Switzerland in 2022

Prices of everyday items are going up due to the added costs for businesses of setting up card payment systems, along with the costs which are levied on each transaction. 

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How much are things going up by?

According to a study by Switzerland’s Watson news organisation, the average card transaction costs the company 11 cents. 

The banks charge a fixed rate of ten cents per transaction, along with a fee which averages out at 0.7 cents for each transaction. 

READ MORE: Could Covid end the Swiss love affair with cash?

While the costs of each transaction have actually decreased since the start of the pandemic – pre-pandemic transactions cost roughly 28 cents each – the costs are still difficult for businesses to bear. 

With other costs on the rise due to inflation, the Covid pandemic and climate change leading to unpredictable crop yields over the past year, it has become even more difficult for businesses to absorb these costs.

As a result, they are being passed on to the consumer.