What is a mortgage interest rate?

Mortgage interest rate: the cost of your financing

A mortgage interest rate is the interest applied to the borrowed capital used to finance a property.

In practice, it represents:

• the cost of borrowing money from the bank,

• a key component of your overall financial burden.

The higher the rate, the greater the total cost of the financing.

What are the main types of rates?

In Switzerland, mortgage loans are generally based on different types of rates, each with its own logic.

Fixed rate

A fixed rate allows you to lock in an interest rate for a defined period.

• payments remain stable,

• financial planning is easier,

• your budget is predictable throughout the term.

This type of rate is often chosen for its stability.

Variable rate

A variable rate changes depending on market conditions.

• it may be adjusted by the lender,

• it offers more flexibility,

• but introduces uncertainty regarding future costs.

SARON rate

The SARON rate is a reference rate for the Swiss money market.

• it is adjusted regularly,

• it reflects short-term market conditions,

• it can move up or down over time.

It introduces a more dynamic component to financing.

How the rate impacts your project

The mortgage interest rate directly affects:

• the amount of interest paid,

• your monthly financial burden,

• the total cost of the property over time.

The same property project can therefore have very different financial implications depending on the type of rate chosen.

Factors influencing interest rates

Mortgage rates are influenced by several elements:

• general economic conditions,

• monetary policy,

• the financing duration,

• the borrower’s financial profile,

• equity level and loan-to-value ratio.

These factors determine the conditions offered by the lender.

Choosing the right rate

The choice of rate should not be based solely on the current level.

It should reflect:

• your risk tolerance,

• your investment horizon,

• your ability to absorb changes in payments,

• your overall financial strategy.

A lower rate may imply more variability and uncertainty over time.

A structuring decision

The interest rate is a key component of your mortgage loan.

It should be consistent with:

• your financing structure,

• your wealth objectives,

• your personal situation.

In some cases, combining different rate types may be considered.

Integrating the rate into your overall strategy

The mortgage rate should not be analysed in isolation.

It is closely linked to:

• your mortgage structure,

• your borrowing capacity,

• your repayment strategy,

• and the overall cost of your property project.