Even though interest rates have risen since the start of the year, they remain at a low level. Therefore, anyone interested in currently buying a property may well decide that a fixed-rate mortgage is a favorable option right now. Ultimately, your intuition might tell you that you need to secure these low interest rates now through a long-term fixed-rate mortgage.
In this case, however, your intuition is actually deceiving you! Instead of a fixed-rate mortgage, financial experts are now advising cost-optimizing mortgage borrowers to opt for a different type of mortgage: “According to the interest rate expectations of the Swiss financial market, the money market mortgage (Geldmarkthypothek) remains the most cost-effective form of financing,” reports the Interest Rate Outlook for Mortgage Borrowers (“Zinsausblick für Hypothekarnehmer”) published by UBS. Depending on your personal situation, a combination of a SARON mortgage and fixed-rate mortgage may also make sense.
The keyword in this context is SARON. The Swiss Average Rate Over Night, which is an important Swiss reference interest rate published daily. Most banks in Switzerland offer mortgages based on the SARON reference interest rate. These are highly flexible mortgages with an indefinite term. However, the terms and conditions of each offer may vary depending on your provider. The quarterly interest payable tracks the reference interest rate on a 1:1 basis. To determine the interest rate for the respective period, the SIX Swiss Exchange provides the Compounded SARON reference interest rate, which is calculated from the average daily compounded SARON interest rate, thus making SARON a highly transparent product. These money market mortgages, as the experts call them, are in contrast to fixed mortgages whose interest rate is simply “fixed”.