The Swiss National Bank (SNB) has announced its second key interest rate cut under its president, Martin Schlegel. The rate will decrease by 25 basis points, from 0.5% to 0.25%. Unlike the unusually large 0.5% cut in December, this move was expected. As usual, Reuters surveyed economists beforehand: 28 out of 32 experts predicted a 25-basis-point reduction to 0.25%.
Interestingly, 19 out of 32 financial experts believe the key interest rate will remain unchanged until the end of 2025. Meanwhile, 10 experts predict that the rate will drop further to 0%, while three respondents expect an increase back to 0.5% by the end of 2025. This fifth consecutive interest rate cut will take effect on March 21.
One of the SNB's primary responsibilities as Switzerland’s central bank is ensuring price stability. Its monetary policy aims to preserve the value of money and support Switzerland’s economic growth.
Currently, the SNB sees inflationary pressure as elevated and expects moderate global economic growth over the next few quarters. The SNB forecasts Swiss GDP growth of 1% to 1.5% in 2025. Inflation remains within its target range of 0% to 2%, but economic uncertainty has increased significantly. The rate cut is designed to address these risks, mitigate downside economic risks, and support economic growth in Switzerland.
The rate cut was anticipated by the markets, meaning:
Switzerland’s reference interest rate for rent was recently reduced in March 2025 to 1.5%. Tenants whose rent is based on a higher reference rate (e.g., 1.75%) can request a rent reduction. However, the lower SNB rate does not guarantee another immediate reference rate cut. The Swiss Federal Housing Office will next announce any changes on June 2, 2025.
For a 10-year fixed-rate mortgage:
Currently, SARON mortgages are cheaper than fixed-rate options, reversing an unusual trend from October 2023 – January 2025, when SARON mortgages were more expensive than fixed ones.
The 25-basis-point rate cut makes investments in real estate more attractive, so demand is expected to remain high.
A price correction in Swiss real estate is unlikely due to:
As previously mentioned, most market participants had anticipated the announced interest rate cut.
The Swiss National Bank (SNB) currently assesses the inflation outlook for Switzerland as highly uncertain. Additionally, it sees significant uncertainty in the global economy, particularly regarding trade barriers such as tariffs, which could weaken global economic growth. According to the SNB, these global trade and geopolitical uncertainties represent the primary risk for the Swiss economy. “Especially in terms of trade and geopolitics, the situation could change quickly and significantly,” said Antoine Martin of the SNB during a press conference on the latest key interest rate decision.
While the SNB expects GDP growth of between 1% and 1.5% for the current year and domestic demand to benefit from rising real wages and looser monetary policy, it also predicts that the moderate global economy could dampen foreign trade and that unemployment may increase slightly. These factors make it difficult to predict future mortgage interest rate developments with certainty. Mortgage rates made a significant downward move after the unexpectedly strong SNB rate cut in December 2024. Now, they are likely to remain stable at a low level.
Uncertainties in the global economy and politics suggest that the Swiss franc may appreciate. The SNB is monitoring the situation and is prepared to intervene if necessary. However, most financial experts expect that this fifth consecutive interest rate cut will be the last for this year. The next monetary policy assessment by the SNB will be published in June 2025.
Mortgage Interest Rate Forecast Until End of 2025:
*Indicative interest rates as of March 20, 2025, at 6:00 PM. The rates were determined by UBS key4 mortgages based on the following parameters: Canton of Zurich, loan amount of 500,000 CHF, affordability ratio of 24%, loan-to-value ratio of 50%, and disbursement date of March 21, 2025. These interest rates do not constitute a binding financing offer.
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Long-term studies show that money market mortgages, such as the SARON mortgage, have historically been more affordable than fixed-rate mortgages. However, from October/November 2023 to January 2025, both short- and long-term fixed-rate mortgages were cheaper than a SARON mortgage—an unusual situation that changed again in January.
Most market participants expect mortgage rates to decrease only slightly or remain stable at a low level in 2025. Therefore, now could be a good time for many to secure long-term financing for their home or condominium under favorable conditions. A look at the historical development of mortgage interest rates suggests that considering a fixed-rate mortgage with a longer term of 5 or 10 years may currently be a worthwhile option. When deciding on a specific mortgage model, it is always advisable to consider your personal family and financial situation and seek advice from a specialist.
It is wise not to rely on a single mortgage type. Instead, spreading financing across different mortgage models and terms helps diversify interest rate risks while minimizing the risk of having to renew the entire amount at an unfavorable time, such as during a high-interest phase. UBS key4 mortgages recommends the following mix:
How you finance or refinance your home depends on many factors beyond just the current interest rate. Your personal and financial situation, future plans, risk tolerance, and expectations regarding mortgage rate trends all play a crucial role in choosing the right mortgage model and term. Seeking advice from a professional and comparing offers, services, and prices is essential—what looks like the cheapest option at first glance is not always the best choice for you.
