The interest rates for real estate loans continue to skyrocket, but the prices for real estate in Switzerland continue to rise, completely unimpressed. The rise in interest rates only has a clear effect on mortgage terms, which are becoming shorter and shorter.
Rising interest rates make shorter mortgage terms more attractive
Interest rates on home loans continue to rise, but despite this there is no discernible slowdown in house price increases. However, as a study by Price Hubble and MoneyPark shows, rising interest rates are having a different effect: shorter-term mortgages are becoming increasingly popular. Long maturities, which were previously the most popular, are now understandably much less in demand. While fixed-rate mortgages with longer maturities have become noticeably more expensive due to rising interest rates and the interest rates for many of these products far exceed the 2 percent mark, Saron mortgages with shorter maturities are well below 1 percent.
According to the study, fixed-rate mortgages with a term of ten years or more were around 30 basis points more expensive than in the previous half-year, while Saron mortgages did not become more expensive. Although the ten-year fixed-rate mortgage is still the most popular option, accounting for more than half of the volume brokered, this form of mortgage is becoming less popular than fixed-rate mortgages with shorter terms. With a share of eleven percent in the last six months, the money market mortgage has achieved a level of popularity that has not been seen for a long time.
Real estate prices continue to rise
Despite the higher interest rates, real estate prices in Switzerland continue to rise. According to the Price Hubble study, prices for single-family homes in Switzerland increased by 5.56 percentage points in the first half of 2022, and by as much as 6.82 percentage points in German-speaking Switzerland. Apartment prices increased by 3.22 percentage points. There is only a small difference between German-speaking and French-speaking Switzerland in terms of housing prices: In German-speaking Switzerland, housing was 3.34 percentage points more expensive, in French-speaking Switzerland by 3.01 percentage points. It remains to be seen whether the continued soaring interest rates will ultimately bring the ongoing rise in real estate prices to a standstill.
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