Why are mortgage rates in Switzerland not falling despite monetary easing?

Since March 2024, the Swiss National Bank (SNB) has lowered its key interest rate several times, bringing it down to 0.00% as of June 2025. Banks’ excess reserves are even subject to a negative rate of -0.25%.

Objective: to stimulate the economy at a time when inflation — now below 1% — has eased significantly compared to 2022 and 2023.

In theory, this looser monetary policy should make mortgage credit more affordable. Yet, in practice, fixed mortgage rates are not following the downward trend. Why this discrepancy?

SARON and fixed-rate mortgages: two very different mechanisms

It is essential to distinguish between SARON (short-term) and fixed-rate mortgages, as their pricing mechanisms differ.

SARON mortgages: directly linked to the key rate

SARON mortgages move in line with the SNB’s policy rate.

Today, SARON is close to zero, which should logically lead to very low rates.

However, in reality, banks are now applying higher margins — mainly due to new regulatory requirements and the increased cost of credit risk.

Fixed-rate mortgages: driven by bond markets

Fixed-rate mortgages are primarily influenced by the yield on Swiss Confederation bonds, currently around 0.20%.

This yield reflects economic expectations (weak growth, moderate inflation). However, banks refinance themselves on the swap market, where the 10-year rate remains higher.

It is this swap rate — plus a margin — that determines the fixed mortgage rate offered to clients.

Regulation: the Basel III effect on mortgage rates

Since 1 January 2025, Switzerland has applied the final Basel III framework, requiring banks to hold more capital when granting mortgage loans.

Loans considered riskier — such as investment properties, commercial or luxury real estate — are particularly affected.

Consequences:

• Higher financing costs,

• Lower profitability of mortgage lending,

• Wider bank margins.

Result: even with low policy rates, mortgage rates remain stable or slightly higher than what monetary policy alone would suggest.

Outlook for mortgage rates in Switzerland

SARON rates: lasting stability

As long as the SNB maintains its key rate at 0%, SARON-based mortgage rates should remain between 0.80% and 1.20%.

The SNB expects inflation to stay below 1% until mid-2028, supporting a prolonged period of stability.

Fixed rates: possible, but limited decline

Fixed mortgage rates currently range between 1.30% and 1.80%.

A further decline is conceivable if several conditions are met:

• A marked economic slowdown,
• Low or negative inflation,
• Increased funding supply (from insurers and pension funds).

Conversely, certain factors could limit this easing:

• A faster economic recovery,
• Persistent inflation (particularly energy-driven),
• A change in tone from the SNB,
• Capital outflows towards higher-yielding markets,
• Increased government bond issuance.

A complex balance between market, economy, and regulation

Even under a highly accommodative monetary policy, Swiss mortgage rates do not automatically follow.

They reflect a complex balance between:

• financial market conditions,
• economic expectations,
• and regulatory constraints.

For borrowers, understanding these different mechanisms has become crucial to choosing between a fixed or SARON-based rate at the right time.

In a shifting environment, the support of a specialised advisor remains a key advantage in optimising one’s property financing.